Grid trading method: the secret weapon for beginners to make money

Why write grid trading method?

Because this is too important for friends who have just entered the venue.

Whether it is playing stocks, futures, contracts, currency circles, etc., it is the same reason. For novices who have just entered the market, the market earns a lot of handling fees, spreads, etc. from them. Because you don’t understand, aren’t you familiar with it? There is no other way but to pay a handling fee first, and let people cut the leeks. After a long time in the rivers and lakes, you have become old fried dough sticks. Everyone understands. But that's how everyone comes here.

However, whether it is the domestic trading market or the overseas trading market, I find that there are more novices than veterans every year. This is a very large group, and the annual fee contribution alone is huge.

So, for novices, are there any strategies or methods to overtake on curves and avoid rollovers?

The grid trading method is the only way I have found so far for novices to beat the market. Simple, no need to watch the market, no need to interfere with daily work.

So, let's talk about this grid trading method today.

Let me talk about the conclusion first: there is no need to run in a bear market, and the backtest income from June 2015 to now is 15% (the market fell by 35% during the same period). From 10 years to 8 years, the annualized rate is 23%. The big red envelope during the turbulent period, the annualized rate is 30% in 2012-13. Of course, this result has something to do with the opening price and the product standard. If you have been doing stock futures for many years and are still losing money, it is better to learn the grid trading method. You will not earn much, but at least you can become the small group of people who make money.

Let's start the topic:

01 What is grid trading method?

Let's first talk about what is the grid trading method. The so-called grid trading method is to set the value center and perform mechanized operations on the individual stocks we want to invest in through the stall buying mode. When the stock price falls, we will do it in batches Buy and sell in batches when the stock price rises. The grid trading method is a completely mechanized trading method, and it does not require us to do any thinking and analysis, as long as it is executed mechanically. It is like a fishing net. When the market fluctuates to different grids, we buy low and sell high. This allows us to control positions more reasonably and avoid chasing ups and downs. Therefore, the grid trading method also has a very strong resistance risk capacity.

There is a very classic position management system in foreign countries, which is a kind of grid trading. As long as the stocks are not delisted, then we can always make profits in this trading method. For example, the current price of a certain stock is 10 yuan per share, and we have a principal of 200,000 yuan. Then we buy 100,000 yuan for the first time. Every time the stock price falls by 1 yuan, we will increase the position by 10,000 yuan. For every one yuan increase, the position will be reduced by 10,000 yuan. This method allows us to continuously sell high and buy low, and completely control the risk within an acceptable range.

To use the grid trading method, we need to follow the following three steps:

First step, first we need to work out the grid plan. For example, if our capital is 100,000 yuan, then the position of each grid is 10,000 yuan, and we will establish ten grid trading systems. If you open a position when the stock price is 10 yuan, then each grid has a density of 10%. In this way, the price space we completely cover is between 10 yuan and 3.87 yuan.

In the second step, after making the grid plan, we start to buy stocks and operate strictly according to the grid trading. We start from the initial price, and we buy another frame every time the price falls. But A-shares are restricted by whole purchases. We can only buy round numbers. In this way, we build a bottom position at 10 yuan, that is, we buy 1,000 shares. When the stock price drops by 1 yuan and becomes 9 yuan, then we buy 1,100 shares. , and when the stock price drops from 9 yuan to 8.1 yuan, we will buy 1200 shares, and so on.

The third step, after buying the stock, we will sell the position we bought in this grid every time the stock price rises. For example, if we bought 1200 shares at 8.1 yuan before, then when the stock price rises to 9 yuan, we will Just sell these 1200 shares, and when the stock price rises from 9 yuan to 10 yuan, we will sell 1100 shares, and so on every time it rises.

This is the most basic grid trading method.

02 History of grid trading method

One day in the 1940s, Shannon, the father of information theory, demonstrated on the blackboard: buy 50% of the funds at any price, that is to say, the amount of funds: stock market value = 50%: 50%. If the stock price rises by a certain amount, sell some of the stocks and keep the remaining funds: remaining stock market value = 50%: 50%; otherwise, if the stock price falls by a certain amount, use the remaining funds to buy part of the stocks, and always maintain the remaining funds: remaining Stock market value = 50%: 50%. Using this method to deal with the random movement of stock prices, long-term trading is profitable. In his more than ten years of trading career, his funds have achieved a compound annual growth rate of 29%. After the age of 50, due to Alzheimer's disease, the trading record could not be continued. Here I temporarily call the transaction mathematical model used above as the "equal proportion position model"-in fact, 50% can be other percentage values.

Let me summarize Shannon's strategy:

First, the rise and fall of stock prices is unpredictable.

Second, if the stock price rises, you will continue to sell and cash out, and if the stock price falls, you will continue to buy stocks.

This is also the most basic and oldest model of the grid trading method. According to this method, you can definitely buy the lowest point of A shares.

03 Actual combat of grid trading method

Domestically, you can generally choose the target: stocks, ETF funds, futures, foreign exchange.

1. Stock selection: Since the grid trading method pursues constant market fluctuations, the more severe the market fluctuations, the higher the rate of return. Even if the stocks do not rise and only fluctuate within a certain range, the grid method will also gain Large returns, according to the characteristics of the grid trading method, will rise and fall, and stocks with larger amplitudes are suitable for the grid method, so stocks with greater daily K-line fluctuations are more suitable for the grid method. Based on the characteristics of the grid trading method above, and from the perspective of security, if you want to play this method, you must first choose stocks with high returns and good quality.

Personally, I think that the heavy holdings of funds are relatively safe. After all, they are the stocks that have been carefully selected by researchers after research by large institutions, and then choose stocks below the large and medium caps. Super large cap stocks are not suitable for grid trading due to their slight fluctuations.

According to the above conditions, select about 5-10 candidate stocks through the software, and then calculate their average daily amplitudes of more than 10 years, and finally choose a stock with the largest daily amplitude for long-term operation, preferably with an average daily amplitude greater than 3%. .

As shown in the figure, for example, Air China:

At the price of 8.1, we build a bottom position of 10 shares, sell one share for every increase of 0.5 yuan, and buy one share for every decrease of 0.5 yuan.

The bottom position is to increase the rate of return, grid trading without a bottom position, the income is very low.

Do a good job of fund management, and ensure that it falls to 5.6 yuan, and you still have money to continue buying.

This buying method is the equal share buying method.

2. Choose ETF funds: ETF funds have better liquidity and are closer to the overall market trend. Therefore, when the trend tends to be oscillating, you can use the grid method and mechanical operation to fill up the profits in the oscillating market. For long-term value investors, you can also use the following method of building a position to guide your investment plan reasonably.

As shown in the figure for example: ETF fund (GEM ETF159915)

1.47 to build a bottom position, buy 1000 more shares for every 0.03 drop. Inverted pyramid buying. (Of course, you can also buy in equal shares like Air China, buying 10,000 copies each time.)

This buying method is a pyramid buying method.

ETF index fund is a collection of a basket of stocks. Retail investors who invest in ETF, a "big stock", can avoid the trouble of picking individual stocks, and don't have to worry about "black swan" events, and are not afraid of stepping on "landmine stocks".

Furthermore, for individual investors whose level is temporarily insufficient, buying ETFs can avoid the embarrassment of "earning the index but losing money".

2. Can futures, foreign exchange and other leveraged targets be used for grid trading?

Yes, yes, but with 10 times leverage for futures, and even 100 times leverage for foreign exchange. The technical level of traders is very high, and it is easy to lose their positions if they are not careful. It is best to meet the following three conditions:

1) The grid is large enough

2) The position is small enough (fund management is the most important)

3) The target price fluctuates greatly

Why?

Why?

Because they have a system that is easy to operate, for example, the grid trading method may be just one of them.

And you are playing entirely by feeling, how can you overcome market fluctuations. In other words, you also know a lot of methods, but you are limited to knowing them. You haven’t played well yet, you just know it but you can’t do it when you operate it yourself. And many methods are anti-human. If you can't control your greed, of course you can't follow this system, but investment is inherently anti-human.

Therefore, we might as well simplify it, even quantify it, digitize it, and then operate clearly according to the plan. Don't let yourself do multiple-choice questions, operate if it fits the plan, and don't move if it doesn't fit the plan. Ignore everything else that affects your plan.

To put it bluntly, grid trading is a very mechanical strategy that is easy to know and easy to execute. You can even choose some securities companies with programmed operations.

But, on the other hand, it is its silly mechanical logic that overcomes the impulsive operation of emergency medical treatment due to market fluctuations.

04 Defects of grid trading method

Of course, everything cannot be perfect, and we must see some flaws in the grid trading method so that we can better control it.

Defect 1: If you fall below the lowest price, you will lose money. Therefore, this method works best in the bottom shock area and has a higher degree of safety. If unfortunately it really falls below the lowest price, it can only be carried to death.

Defect 2: If the bull market starts after breaking through the highest price, the income will not be high. In order to deal with this situation, we can only buy more at low positions and hold them for a long time.

Defect three: the efficiency of capital use is not high. Appropriate optimization can be carried out, such as the first position opening point should be as low as possible, the lower the price, the more you buy, and the higher point you sell. This can only be adjusted slowly.

Despite these shortcomings, grid trading is an excellent strategy. As long as the time is long enough, you can make money in a bear market, and you can also make money in a bull market, but you may make less money.

Grid trading is friends with time compound interest, the longer the time, the greater the compound interest and the more income.