LIMIT orders is where you expect that if the price moves to the outer grid and then retracts back to the middle where it was started, will give you profit. This strategy is the opposite of STOP orders.

LIMITOrders.png

If the price is moving to the outer grid, generally it will provide a larger loss first. What we expect is when the price retracts back to its initial position or at least just halfway to the initial position, it will provide you more profit.

Advantages:
  • If the pair is ranging (especially before the market open times or after the market close times), you will get a good profit.
  • Depends on the scenario, break-even point (a point / price level where it produces zero profit) could be in the middle of the executed grid. For example in the picture: 6 LOWER section orders are executed. When the price retracts back, the break-even point is approximately on the 3rd order from inner grid.
  • Easy and quick in, easy and quick out (note: depends on the strategy).

Disadvantages:
  • The counter of this strategy is when the price is trending.
  • You will get stuck if the price is trending then it finds a new price level and stays there for an amount of time. But this case is not very often (depends on the strategy).


Last edited Jan 28, 2016 at 10:33 AM by radityoardi, version 3