It has been statistically noted that, in terms of market trends, 80% of the time is spent in a fluctuating trend.

Indeed, a single number may not represent the commonality of all markets.

However, when considering the A-share, US stock, foreign exchange, and emerging digital currency markets, the average proportion of fluctuating markets also reaches 50%. So, how can one preserve the principal and obtain profits in a fluctuating market?

Today, the editor will introduce a trading strategy suitable for a fluctuating market - the grid trading method.

What is the grid trading method?

It is said that one day in the 1940s, the father of information theory, Shannon, demonstrated on the blackboard: buy 50% of the capital at any price, that is, the ratio of capital amount to stock market value = 50%:50%. When the stock price rises by a certain margin, sell a portion of the stocks to maintain the remaining capital amount: remaining stock market value = 50%:50%; on the contrary, when the stock price falls by a certain margin, use the remaining capital to buy a portion of the stocks, always maintaining the remaining capital amount: remaining stock market value = 50%:50%. Use this method to deal with the random trend of stock prices, and long-term trading is profitable.

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The core of the grid is to set up the grid and the share of investment in each grid. With the same amount of capital invested, the more grids there are, the greater the possibility of each grid being traded, but correspondingly, the less profit is earned with each fluctuation.

The grid trading operation strategy is divided into four steps: target selection, establishing a base position, setting grid spacing density, determining the capital amount per grid, and executing the trade.Key Points of Grid Trading

(1) Selecting the Underlying Asset

Grid trading requires selecting an underlying asset with a high degree of certainty for long-term appreciation. In a unidirectional downtrend, no bullish strategy can be profitable.

The best choice is an ETF index fund, which is a collection of a basket of stocks. Retail investors can avoid the trouble of selecting individual stocks by investing in this "big stock" ETF. Additionally, some large-cap blue-chip stocks can also be chosen, but I would recommend ETFs more because the certainty of long-term appreciation of index ETFs is higher than that of individual stocks.

At the same time, there is no fear of black swan events. Index ETFs are available for purchase in stock accounts, such as the New Energy Vehicle ETF, Securities ETF, and Communication ETF. These are all excellent underlying assets, and the amount of each share is similar to that of a fund, which is convenient for trading.

(2) Establishing a Base Position

The best time to operate grid trading is during a bear market. We must first establish a base position for grid trading, which depends on market valuation. For example, if the current valuation is low, the base position can reach 40-60%.

(3) Determining Grid Spacing Density

For example, if the closing price of the Easy Fund 500 ETF is around 5 yuan, and according to the historical lowest point of the CSI 500, there is a 25% decline space in the future, we set the bottom price of the Easy Fund 500 ETF at 3.75 yuan, with a price interval of 1.25 yuan, and the top price is set at 6.25 yuan.

(4) Share Allocation per GridTranslation of the provided text into English:

That is, the trading volume per grid cell. Specifically, it should be combined with one's own capital. If it's too dense, it can lead to frequent transactions. Transaction fees are part of the losses. When the market is falling, it can lead to buying too early.

Limitations of Grid Trading Method

However, there is no universal strategy in investment, and the grid trading method also has its limitations.

1. The trend determines the success or failure of the strategy. Satisfactory returns can only be achieved in the long-term oscillating uptrend.

2. The base position price should be set within a safe margin. Setting the base position price at the valuation peak is extremely risky and can lead to significant losses.

3. Poor performance in a bull market, a diversified position strategy, and not modifying the grid based on price patterns can all result in underperforming the market in a bull market.

Therefore, it is necessary to truly understand the grid, not just conceptually, but also through simulation and backtesting, and to experience the charm and limitations of the grid trading method in real combat.

Grid trading is actually a form of quantitative trading. If frequent transactions require manual monitoring, it would be too tiring. The grid trading method is the only method I have found so far that beginners can use to beat the market. It is simple and does not require monitoring, which does not interfere with daily work.