GRID TREND MULTIPLIER
What are the benefits of Balancing your open trades?
The difference between Pruning and Balancing
There are 2 ways of managing the number of open deals you have when trading the Grid Trend Multiplier. The one way is to establish the maximum number of open deals and to restrict the open deals to that number by using the Maximum Open Deal setting of the EA. This is called pruning and only happens where you have all buys or all sells at the edge of your blanket of open trades.
Please refer to this page for more details of this technique PRUNING
Please note all the pruning and balancing principles only applies to the Non Directional GTM strategy.
Balancing should happen when the price is in the middle of your open deals ( if you have 16 open deals it is in position 8 or 9). At this point the $ balance of your Open sell transactions should be equal to the $ balance of your Open Buy transactions.
Although both Pruning and Balancing both help the GTM trade in the direction of the trend, please do not confuse them.
Balancing open trades
The 2 tables below illustrate the differences between the times when pruning happens and balancing happens.
The light green table shows 16 open trades and the price at the edge of the 16 open trades. The cost of the open trades is $ 1 360 using a 10 pips gap in this example. If the price continues down pruning could be a good option and the benefits of that are shown on this page PRUNING
The light purple table shows 16 open trades and the price at the middle of the 16 open trades. The cost of the open trades at point is $ 720 using a 10 pips gap in this example.
The first point to notice is that the cost of open trades when the price is in the middle is a full 640 pips lower (47% lower). This is the point where the cost of open trades is at its lowest and provides a great balancing opportunity.
See below how to balance and what the benefits are
Now, when the price is in the middle of open trades, if you cash open trades in, it will not affect your equity at all, because equity = gains less the cost of open trades.
Let's say your gains were 1 500 pips and the cost of open trades is $720 your equity would be = $780
So if you closed some open deals your equity would not change. In the above example lets say you balance your open deals by closing the 2 biggest buy open deals and you close the 2 biggest sell open deals. This would reduce the cost of open deals by 300 pips.
Your equity will stay the same as your gains would go to 1200 pips (1500 less the deals closed) but the cost of open deals will go to 420 pips (720 less 300).
You equity will be 780 (1200 pips - 420 pips) - THE SAME AS IT WAS BEFORE YOU CLOSED THE DEALS.
So what have we achieved.
- We have lowered the cost of open deals without impacting equity.
- We have also reduced the risk (cost of open deals) if the price starts trending by having 2 fewer trades facing the wrong way.
Now, when the price is in the middle of open trades, if you cash open trades in, it will not affect your equity at all, because equity = gains less the cost of open trades.
Let's say, before balancing your gains were 1 500 pips and the cost of open trades is $720 your equity would be = $780
So if you closed some open deals your equity would not change. In the above example lets say you balance your open deals by closing the 2 biggest buy open deals (80 + 70) and you close the 2 biggest sell open deals (80 + 70). This would reduce the cost of open deals by 300 pips (150 + 150).
Your equity will stay the same as your gains would go to 1200 pips (1500 less the 300 of deals closed) but the cost of open deals will go to 420 pips (720 less 300).
You equity will be 780 (1200 pips - 420 pips) - THE SAME AS IT WAS BEFORE YOU CLOSED THE DEALS.
So what have we achieved.
- We have lowered the cost of open deals without impacting equity.
- We have also reduced the risk (cost of open deals) if the price starts trending by having 2 fewer trades facing the wrong way.
So The next question on your mind must be.....
Why not close all the transactions when the price is in the middle of all the open deals even if equity is positive or negative?
The answer is - yes it would be good closing all transactions. It may cost the spread to do this but it dramatically reduces the cost of open deals in a trending market.
Let's do the sums
The example is a continuation of the example above except that all open trades have been closed when the price reached the middle of the open deals range.
It is assumed that the price then trended another 18 price ranges after this. 10 pips x 18 ranges = 180 trend
The light blue table shows the impact after balancing. The cost after a 180 pip trend is $ 1 710.
The light orange table shows the impact if nothing was done. The cost after a 180 pip trend is $ 3 510.
MORE THAN DOUBLE THE COST - The bigger the trend the bigger the benefit or difference.
Conclusion:
Always cash in all your deals when the price is in the middle of you open deals if you are positive or even if you are negative.
Balancing is one of the most powerful Trend Following Tools available to GTM traders - use it whenever possible - especially when you have positive Equity.
NEXT UPGRADE
Balancing and closing all deals when the price is in the middle of your open trades is currently not a setting in the Grid Trend Multiplier. It has developed recently as result of some advanced testing by some of our clients.
It is anticipated that this could be included in the next update with the following settings
Do you want to use open trade balancing. Yes / No
If Yes is used, this setting will close all open trades when the $ balance of all the open buy deals are equal to the $ balance all open sell deals.
Balancing will have to be done on a manual basis until the next upgrade.
Questions, comments and responses
Please the reply facility below to ask any questions or make any comments about the above topic.
12 responses to “Balancing your Grid Trend Multiplier Open Forex Trades”
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Balancing shall be the best act of the trading. And one step more towards set and forget.
Sounds like a very logical thing to do.
I am not sure i understand it can you do a video about it please ?
Regards
Excellent logic
I started a tiny mini $200 funded account. I cannot afford the luxury of opening 30 trades at any one time. So I use a large pruning scissor and kept the tree from growing no more than 5 fruits. So far so good with a return of 120%. But this is not a “set and forget”. Maybe a “set-and-guard” — just in case 🙂
Love the improvements, and looking forward to the next upgrade. Go Team Go
While your final balancing example above shows less cost being committed to the grid, the maths is slightly off.
Having closed all the trades prior to the 180 pip trend, you also missed out on 10 x 10 pip trades = 100 pips – having just closed the trades which were just about to come into profit.
when price in the middle of open trades, it indicates instrument is trading at center of balance/range phase. Most of trend starts from middle of range. But Alex’s suggestion to balance GTM every time it goes to middle of range will defeat the multiplier effect during most of range market. It only helps if market is strong trend.
Try both approaches and see what happens. You will continue to cash in on every move of the market after balancing so the multiplier will still work but your risk will reduce immensely. Do an excel spreadsheet.
Not planning to do a video. Please reread the article a few times and then ask specific questions.
Some bad news today. My small funded account with Alpari was bankrupted today. Traded EUR/JPY with the non-directional GTM Ea. The price movement headed too much North and the trade was negative with SELL-SELL-SELL-SELL. Finally it was gone with the wind.
Dear Alex,
As far as I can see, the very best time to close an open grid level is when the ea closes a grid at profit in the opposite direction. With the non directional grid trader ea, the ea is set to close all the grid once a one level reversal has occurred.What if the Grid Trend Multiplier was set to close only the largest open trade when a one grid reversal had occurred? For instance, if the market rose through ten grid levels and then dropped by one level there would be 10 buy cash ins and 1 sell cash in; minus the closeout of the first sell at level 9 leaves a plus of 2 levels. All the other grid levels are still open and awaiting their turn. It would seem to control the position if the market started trending, after all we are only needing a pull back of 1 grid level maybe 12 to 20 pips to profit. Seems logical to me, am I missing something? Please comment.