This is quite an interesting discussion.
One of the challenges I find in using the grid hedge is determining the grid size.
- Use a fixed grid size for a ranging market - increasing the size as a trend develops.
- Use support and resistance for the points of opening long/short positions.
- Using a Stochastic for initiating new long/short and cashing in positives when overbought/oversold.
On point 2. - given that most major breakouts result in a retracement how would one determine an appropriate grid size? I think using stoc would help here.
On point 1. - adjust the time in trade. For example: say you determine a range of 1000 pips for 7 days, and divide the grid in 5 = 200 pips grid size. Now, let's say the range is broken and instead of expecting to be in the trade 7 days, you make the adjustment to be in for say 14 days. I think this is where you would have to plan beforehand - having looked at S/R over a larger time-frame, say weekly instead of daily.
I think this would make better sense if I posted a chart of the GBPJPY. Keep you posted.