Hi, quants and all,
I've been working on this forex grid trading strategy these days and would like to share it here with anyone who's interesting in doing so. This is merely a very basic grid trading system, but a lot of things can be optimized in there. See here for what my analysis is about and welcome any thoughts.
Cheers!
Alexandre Catarino
Hi Michael Hsia ,
Thank you for your contribution!
Given the growing popularity of crypto-currencies, what are your thoughts on using this strategy with them against fiat currencies?
Michael Hsia
Hi @alexandre_catarino
The grid system was built on the assumption that:
I don't think the nature of crypto doesn't match any of the above assumptions if you see this from the monthly granularity. Perhaps changing the observation period to form the reference price from monthly to daily or even hourly would be more adequate. Also maybe try running different currencies against this system so that you'll find out which currency is the most profitable.
.ekz.
Great work Michael Hsia!
My first ever live strategy was a grid trader, for EURUSD. I learned some valuable lessons about warehousing risk (MAE) and negative skew. After learning how to take the losses, i'm still a believer in grid strategies --if they have the proper guardrails.
That was about 2 years ago, and I have meant to revisit grid trading with crypto, as the market noise (and price oscillations) are suitable for grid trading, when they occur. Some day I'll give it another go, with a focus on the right noise filter --looking for the least efficient price action (using the Kaufman Efficiency Ratio) as a filter, on an hourly time frame (as you suggested above).
Also, thanks for sharing your article. After a quick skim, it looks like it will be inspiring – I'll try to read it fully some time during the week.. I've also just ‘followed’ you.
On a related note, here's a relevant article on grid trading from Quantpedia that you might find interesting.
Michael Hsia
Hi .ekz.
Thanks for your appreciation.
Actually, the article is the exact piece that inspired me to work on this grid trading system project. I'm still working on it and trying to think of a way to find the proper guardrails as you mentioned. Sadly so far no luck to prevent me from great risk. Would be interesting to hear some more from you.
Cheers
Toaster
Hi Michael,
just to cover your back, im also a grid trader with this other well-known software around.
It works for forex and other markets 😊
Michael Hsia
Toaster
Cool! I'm at the moment also applying grid trading strategy against crypto and see which pair is the best instrument.
Michael Hsia
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