The core idea: Buy low and sell high within a defined price range to capture profits from oscillations.
How it works:
1.Set a price ceiling and floor (e.g., ¥0.80 – ¥1.20).
2.Divide the range into equal intervals (e.g., 10 grids, each ¥0.04 wide).
3.When the price drops to a grid’s buy line → Buy.
4.When it rises to the corresponding sell line → Sell.
5.Each completed cycle captures the fixed spread between buy and sell prices.
Grid trading profits from price volatility. The more frequent the swings, the more trading opportunities—but also the higher the risk of "breaking the grid" (price moving beyond set limits). Suitability depends on risk tolerance and instrument selection.
|Instrument Type |Annual Volatility| Grid Suitability|
|Broad-based (CSI 300)| ~15% | Moderate |
|Sector (Securities) | ~30% | Good |
|Cross-border (CN ADR)| ~40% | Excellent|
Broad-based ETFs have lower volatility, potentially triggering only a few grid cycles per year—limiting profit potential. Higher-volatility instruments can trigger dozens of cycles annually, though they carry a greater risk of breaching grid boundaries.
Number of Grids: 8–12 is optimal. Too few lacks sensitivity; too many leaves thin margins per grid.
Grid Spacing: 4%–6% for sector ETFs; 2%–3% for broad-based indices.
Capital Allocation: Equal amounts allocated per grid level.
Price Limits: Set ceiling/floor based on 1–3 years of historical highs and lows.
The primary risk is "breaking the grid"—when prices move beyond set limits:
Breaks below floor: All buy orders triggered; capital fully deployed and potentially stuck in a declining market.
Breaks above ceiling: All positions sold; missing subsequent upside.
Thus, grid trading suits range-bound or sideways markets, not strong bull or bear trends.
Visit the "Grid Master" section on huice.org. Choose from pre-set parameter templates (Conservative / High Volatility / Cross-Border) or customize your own. Input your chosen ticker, run a backtest with historical data, and observe how the strategy would have performed.
Disclaimer: Grid trading carries risks. Historical backtesting does not guarantee future returns.