Grid and Averaging: How They Work and What the Risk Is

This is the most popular and the most controversial technique in trading robots. Let's go through it without scare stories and without advertising: how it works and what can go wrong.

What a grid and averaging are

Imagine you bought EUR/USD at 1.1000 and the price went down. A typical trader sets a stop-loss and exits with a loss. A robot with a grid does it differently: for every, say, 20 pips down it buys one more small position. That's how a "grid" of orders is built.

Averaging is what comes out of it. The lower you buy, the lower the average price of all your purchases. So to close the whole basket in profit, the price doesn't have to return to the first entry. A small bounce from the average price is enough.

That gives the main property of this approach: many small profits and a rare deep drawdown. The market tends to swing back and forth more often than it runs in one direction without a pause, and a grid earns on those swings. But when a move does run one way for a long time, losses pile up.

According to our site, EUR/USD works as a grid. The "Risks" page says it directly: some of the robots use a grid and averaging, and in a strong market move the drawdown can be deep.

An example with numbers

Let's take a made-up example, not the trading history of our robots. EUR/USD, a grid step of 20 pips, each order 0.01 lot. One pip on such an order is worth about $0.10. The grid can open 10 orders in total.

The good scenario. The price went down 60 pips and opened four orders, at 0, −20, −40 and −60 pips from the first one. The average price is at −30. Then the price bounced to −20, that is 10 pips above the average. All four orders closed for +40 pips in total, about $4. Not much, but the price didn't need to return to the first entry.

The bad scenario. The price doesn't bounce and keeps falling. All 10 orders are open, and now every extra pip down costs $1. The floating loss at different depths:

500 pips on EUR/USD is five cents. Moves like that happen, not every year, but they happen. Notice how the loss grows: the longer the price runs against the grid, the faster it piles up, because more and more orders are open. This is an example with a constant order size. If a grid increases the size with every step, the loss grows even faster.

Why the deposit and the drawdown matter

Look at the table again. The same grid, the same market move, and the drawdown differs fourfold. It all comes down to the deposit. On a small account a grid simply doesn't fit: it can't survive the bad scenario, and the account is closed forcibly.

That's why we recommend a deposit of at least $500 for our robots.

Drawdown is the fall of the balance from its peak to the deepest point. It, not the pretty return in an ad, shows whether you'll live through a bad stretch. Before you start, ask yourself a simple question: if the account falls by 30%, will I take it, or will I panic and switch the robot off? If you switch it off, at the moment of the deepest drawdown you lock in a loss that the grid might have recovered later.

The return shown on the site is the average monthly figure from trading history, not a promise. The future may look different.

What a beginner should do

1. Start with a demo. The trial period is 14 days, demo account only, and you don't pay anything. The robot runs in its full version, you see how it behaves on the market, and you risk no money.
2. Watch the drawdown, not the profit. Over the 14 days, note how deep the balance went and how many orders the grid opened. Are you comfortable with that picture?
3. Don't risk money whose loss you can't afford. This rule matters more than any robot.
4. Don't interfere by hand. If you're not sure, don't close grid orders manually. Want to change something? Message us first.
5. Don't raise the size to chase income. A bigger size means both profit and drawdown grow faster.
6. Let the robot run on a server. Switching the terminal off in the middle of a grid can leave positions unattended. More in the article about VPS.

A grid is neither a scam nor magic. It's math with a clear price for the risk: frequent small gains in exchange for a rare big loss. By choosing this approach, you agree to exactly that.