Grid trading is a trading strategy based on stock price fluctuations. It involves presetting strategy parameters, which the system uses to execute buy-low and sell-high trades, aiming to profit from price fluctuations in swing trading.

Investors divide their portfolios into multiple portions in advance, set a base price, and plot corresponding grids based on price fluctuations around that base price. When the stock price falls and triggers a grid, they buy a portion at a predetermined price and quantity. Conversely, when the stock price rises and triggers a grid, they sell a portion. By consistently executing these buy and sell actions, they aim to profit from the price fluctuations.

How to submit a grid strategy?

Step 1. After entering the trading hall or accessing the quick trading drawer, select Grid Trading on the Order Type page.

Step 2. Enter the price and quantity parameters as prompted on the interface, and then submit the strategy.

Step 3. After submission, you can view the corresponding grid strategy record on the stock details page. Click on it to directly access the strategy details. You can also access the portfolio page or the order record page to view the corresponding strategy details, as well as the related trades and profit and loss information. If the strategy is not applicable to the current market trend or needs to be suspended for any other reasons, simply click on the strategy and choose to either suspend or cancel it directly. If adjustments to the strategy parameters are required, click Adjust to make the necessary changes.

How to set strategy parameters?

Base price: This refers to the initial price calculated for the grid strategy. The system calculates grids above and below this base price based on the trigger condition established by the user, and monitors in real time whether the market price of stocks touches these grids. When the market price triggers a preset grid, the trigger price becomes the new base price, and new grids are recalculated based on the trigger condition.

Maximum price and minimum price: These parameters define the effective price range for the operation of the entire grid strategy and serve as risk controls. If the trigger price during operation exceeds the maximum price or falls below the minimum price, it is considered outside the expected effective price range of the grid strategy.

Exceeding the price range: You may choose either not to place any orders or to directly liquidate all stock positions at the most recent price.

Trigger condition: This parameter defines the grid size. The upper and lower grid levels can be set based on either the spread or a percentage, and the price at which orders are placed after the grid is triggered by a rise or fall can be set separately. For example, if the base price is RMB 100, an order will be placed at ask 1 when the spread increases by RMB 1.00, and at bid 1 when the spread decreases by RMB 1.5. If the stock price rises to RMB 101, triggering the upper grid level, sell orders will be placed at ask 1 based on the preset quantity for each order. Conversely, if the stock price falls to RMB 98.5, triggering the lower grid level, buy orders will be placed at bid 1 based on the preset quantity for each order.

• Market price (market order): When a grid is triggered, a market order will be placed. The actual fill price will depend on the prevailing market conditions at that time.
• Market price (limit order): When a grid is triggered, a limit order will be placed at the current market price. The actual fill price may be better than this limit price but may not be executed immediately.
• Trigger price (limit order): When a grid is triggered, a limit order will be placed at the trigger price. The actual fill price may be better than this limit price but may not be executed immediately.

Quantity for each order: This parameter specifies the number of orders placed when the stock price fluctuations trigger a preset grid.

Validity: Supports long-term orders, with options including DAY, Good 'Til Canceled (GTC), and Good 'Til Date (GTD).

Session:

• Regular trading hours (RTH): Grid trading is executed exclusively during regular trading hours.
• Regular trading hours + pre-market and after-hours trading sessions: Grid trading can be executed during regular trading hours, and pre-market and after-hours trading sessions. Please note that during pre-market and after-hours trading sessions, only limit orders are supported, and trigger conditions do not allow for the selection of a market price (market order).

Multiple placement: If multiple placement is enabled, and the stock price opens with a gap up or down that exceeds one grid, the quantity for each order will be multiplied according to the number of grids covered.

Position limits: If the position limit control is enabled, you can set maximum and minimum positions. When a grid is triggered, the system will check whether the order exceeds the established position limits. If it does, the order will not be placed.

Short selling: If short selling is enabled, a zero position can trigger an automatic short sale. If short selling is disabled, a zero position will not trigger a sale.

Note: Grid trading is not available for overnight trading or during the auction sessions of Hong Kong stocks.

Key Takeaways: Grid trading is a strategy that involves setting a base price and plotting corresponding grids based on the base price. By consistently executing buy and sell actions, traders aim to profit from price fluctuations. Setting strategy parameters includes base price, maximum and minimum prices, exceeding the price range, trigger condition, quantity for each order, validity, session, multiple placement, position limits, and short selling.

FAQs

Q1: Why wasn't my grid order triggered even though the market conditions were met?

This could be attributed to factors such as the set maximum and minimum grid positions, price range, insufficient current positions, or lack of purchasing power. It is recommended to check the parameters of the grid order to ensure they meet the trading conditions.

Q2: Why was my grid order triggered even though the market conditions were not met?

Grid orders are triggered in real-time on a transaction-by-transaction basis, while the market chart reflects time-weighted results. This may result in a discrepancy between the displayed market conditions and actual transactions.

Q3: Why is it necessary for the grid settings to exceed 5 quote levels and be 0.5% above the base price?

To protect users, the system has established parameter limits, requiring the grid order settings to be at a certain distance from the base price. A trigger condition interval that is too small may result in profits being insufficient to cover transaction fees.

Note: The system uses specific market data as the standard for monitoring market prices. Example: The US stock market utilizes nationwide market data; however, Basic market data may differ from this nationwide market data.

Disclosures

The information provided herein is provided for reference only and does not constitute any investment advice.