Grid Expansion

Grid expansion sits at the heart of why grid EAs are excluded from serious editorial consideration. The expansion parameter creates a tradeoff between recovery probability (more expansion = more orders to catch reversal) and tail risk (more expansion = more open positions during adverse move).

How grid EAs work:

• At deployment, EA places buy and sell orders at fixed price intervals (e.g. every 30 pips) above and below the current price • When price hits an order, the order fills and another order is placed at the next grid step • Profit targets are set so that any single fill closes its corresponding order at small profit • Grid expansion controls how new orders are placed as price moves away from the initial grid range

Grid expansion variants:

• **Static grid**: orders placed only within initial range; no expansion beyond that. Limited tail risk but also limited recovery if price doesn't return • **Linear expansion**: when price moves outside grid, new orders placed at same interval. Linear growth in position count over time • **Geometric expansion (martingale-grid)**: when price moves outside grid, new orders placed at decreasing intervals with increasing position sizes. Exponential growth in cumulative exposure • **Capped expansion**: similar to linear or geometric but stops adding positions after N expansions. Bounds the worst-case exposure

Why grid expansion creates structural tail risk:

• **Sustained directional moves accumulate exposure**: during periods of strong directional movement (which can last days during regime stress), grid EAs accumulate dozens of unrealised losing positions • **Margin pressure compounds**: as cumulative position size grows, broker margin requirements consume increasing fraction of capital • **Forced liquidation**: when account equity drops below margin requirement, broker liquidates positions at the worst possible time, locking in maximum losses • **Recovery requires reversal that may not come**: grid logic assumes mean reversion that doesn't always occur. Regime changes can produce sustained directional moves that never reverse to grid range

Editorial position: grid expansion is the mechanism that makes grid EAs structurally dangerous regardless of how the parameter is tuned. Even capped expansion produces large cumulative exposure during the inevitable extreme adverse move. Grid EAs are excluded from safety-tier and most-profitable-tier editorial consideration because the architecture's tail risk is unbounded by design even when expansion is bounded by configuration.

For EA buyer evaluation: any EA marketed with grid logic should disclose its expansion parameters explicitly. Vendors who hide expansion details are likely using aggressive expansion that produces unsustainable tail risk; vendors who disclose may have more conservative settings but the underlying architectural problem remains.