Grid trading is a relatively simple and practical method, which is quite suitable for us retail investors. Although this method is straightforward, it also requires the use of some technical analysis skills to form a closed loop of trading in order to achieve real results.

Because grid trading involves buying in batches at lower price levels when the stock is declining, and typically does not involve leverage, it is essentially not necessary to set stop-loss orders unless there is a stock that encounters a major issue and delists. Today, the technical method we are discussing mainly focuses on buying and selling.

1. Use reversal candlestick patterns for buying and selling.

When the stock you are monitoring enters a low price range, allocate your position into multiple batches and pay attention to the shape of the candlestick charts. Buy each time a reversal candlestick pattern appears. After buying, if the market reverses and goes up, and you are in profit, when a bearish reversal candlestick pattern appears at a higher level, we close the position.

The chart shows the daily K-line chart of a securities ETF.

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After a significant drop, the market bottomed out and rebounded. After the rebound was established, it began a second bottoming process. During this second bottoming process, buy in batches each time a reversal candlestick appears.

There are 4 buying opportunities in the chart. After the 4th buy, the market turned from a decline to an increase, and when a bearish reversal candlestick formed at a higher position, we closed the position.

You can close the position entirely or partially. After a partial close, the remaining position can wait for the market to continue to rise, and close the position again when a reversal candlestick appears.

If the market falls back after closing the position, and a reversal candlestick forms during the fall, continue to buy, creating a cycle of buying and selling, forming a closed loop.

2. Use moving average indicators for buying and selling.When the stocks you are watching enter a low price range, allocate positions and wait for the candlestick to close above the moving average. Buy in batches, and if the market reverses and goes up after the purchase, when the position is profitable, close the position when the market reverses and breaks through the moving average at a high level. The chart is a daily candlestick chart of the securities ETF.

The market trend is the same as the one in the above chart. We change the entry method to buy when the market stands above the 10-day moving average. After the market falls, there are three opportunities to buy (three red circular buy opportunities on the left side of the chart).

After the third purchase, the market rises, surges for a while, and then falls, breaking through the moving average. At this time, you can close the position (two blue circular sell opportunities in the chart). After the market falls again, a buying opportunity is formed (the red circular opportunity on the right side), and then the market rises sharply, forming a selling opportunity at a high level.

Note: Using a moving average with a small parameter to buy and sell will have a higher frequency, and you need to reduce the proportion of each buy and sell position, buy more times and sell more times. Using a moving average with a large parameter will have a lower frequency of buying and selling, and the proportion of each position can be slightly increased, buy and sell less.

In addition, you can also use the moving average crossover technique to buy and sell. Buy when the golden cross occurs and sell after making a profit when the death cross occurs. The chart is a daily candlestick chart of the securities ETF.

The market trend is the same as the two charts above, changing the rules for buying and selling to buy when the two moving averages form a golden cross and sell when they form a death cross. There are two buying opportunities in the chart.

After the second purchase, the market reverses from falling to rising. After rising, the market forms a death cross at a high level, but it is not possible to close the position at this time because the market has fallen sharply after the moving average crossover, and the position is in a floating loss. Continue to hold and wait for the market to be profitable at a high level, and then close the position after forming a death cross.

Both technical standards can be used for partial closing or full closing. After closing, when the market shows a buying signal, buy again, and form a logical closed loop of buying and selling.Let's discuss some precautions for grid trading:

(1) Be conservative when buying and aggressive when selling. If the prices for two buying opportunities are very close, you can execute only one; however, if the prices for two profitable selling opportunities are very close, you should execute both, as this can lock in more profits and secure gains.

(2) You can cross-use the technical criteria mentioned above, such as using a reversal candlestick to buy and a moving average to sell. Conversely, buying on a moving average and selling on a reversal candlestick is also feasible.