Trading with a grid system in forex involves placing orders to buy or sell a currency pair at a select interval in a grid-like fashion while also putting take-profit orders on these trades just under the selected interval.  So for instance, one might place a buy order every 20 pips on EUR/USD with a take-profit of 18 pips.  As the euro goes up a buy order will be hit and the order will be closed for a profit after it's moved 18 pips.  As the euro continues to go up, the next order is hit and so forth.  Generally speaking, there would only be one trade open at a time in this system, although there are many different variations you can use.

One of the biggest objections to utilizing a grid system to trade is that of the dangling trades.  Danglers are those trades that are opened but never closed because the price fails to hit the take profit level.  If the forex trader is not using a stop-loss, which many grid traders choose not to use, then that trade may begin to realize quite a loss as the price moves further and further away from a profit.

Proponents of grid trading argue that there are a number of ways to eliminate the problem of dangling trades.  One of these is to simply implement a stop loss at a predetermined level.  Ideally, this stop loss would not be hit unless the trade was convincingly moving away from a profit, and it will also not make the (possibly large) loss exceed the numerous small wins that a grid system generally earns.

Another common method to offset the danger of danglers is to simply gear your trade so low that the danglers don't cause a lot of pain.  That is, keep each trade so small that one lone dangler will never jeopardize your overall account.  Then, you may either attempt to trade your way out of the loss by reloading your grid when you feel it begins to turn your way or just hold onto the open trade until it reaches that level again...always a dangerous proposition.

Many grid traders will complement a grid system with a carry trade strategy to lessen the pain caused by the open trades.  That is, all open trades are earning interest every day so that eventually the interest would make up for the lossing trade.

Grid trading forex is certainly not for everyone, but it can be a profitable system if you maintain your rules and look for good entries while utilizing a sound money management system.  Obviously, at times a currency pair is trending while other times it ranges.  You need to develop a strategy that works in both of these different markets or be willing to stand aside until the market returns to a point that works with your strategy.