What Is A Grid Trading Strategy And How A Grid Trading Bot Perform?

By Author: Growlonix
Total Articles: 11
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With the prices of crypto assets fluctuating within a matter of minutes or seconds, and markets opening 24 hours a day, it becomes really tough for crypto traders to keep up with trends. For beginners, it’s tough to react to these market movements enough to take advantage of opportunities to profit. Furthermore, the delay in transactions may worsen the problems.

Traders cannot monitor all the crypto exchanges and market trends round-the-clock to achieve optimal trading results. Fortunately, we are living in the age of automation. And, for many traders making use of crypto trading bot is the best option. These bots work on algorithm to trade and execute transactions. They are very easy to use and can help traders execute trades profitably and efficiently.

There are different strategies that traders use to execute profitable trades. One such trading strategy that is gaining huge popularity among crypto traders is the grid trading strategy. This strategy is designed to combat the volatility of cryptocurrencies and navigate market uncertainty. Let’s understand about this ...
... strategy:

Grid trading

Grid trading is actually a strategic tool which automates the buying and selling of crypto assets at preset intervals around a preset price range to construct grids. This kind of trading method works well in a volatile market when the price fluctuates at specific intervals. This way, grid trading helps traders to make profits from smaller price changes.

This kind of trading can be performed by making use of grid trading bots which will execute a series of buy/sell orders on a preset interval within an oscillating price range to buy at a low price and sell at a higher price. This kind of trade happens automatically based on the preset parameters, allowing traders to earn profits.

Grid trading provides profitability to the trader every time the selling price of the asset exceeds the buy price during a flat movement in the market by automatically executing low buy orders that lead to high sell orders. This fact eliminates the need for market forecasting. This way, traders can easily take advantage of a ranging environment.

Let’s understand this with an example:

Suppose the price of an asset, say XYZ, ranges between $50,000 and $40,000. The seasoned grid trader would set a lower limit slightly below $40,000 and an upper limit slightly above $50,000. When the price dips to the lower limit, the grid bot automatically buys the asset XYZ.

After a while, when the price reaches the upper limit (slightly above $50,000), the grid bot unloads the position, generating Pete a decent profit. Traders may even tell the bot to scale in and out of positions.

How does grid trading strategy work?

Grid trading strategy involves placing orders above and below a set price using a “price grid” of orders. The price grid consists of orders at incrementally increasing and decreasing prices. Let’s understand how this strategy works for crypto assets:

For instance, you may set buy orders at every $5000 below the current market price of the Bitcoin (BTC) and sell orders every $500 above BTC’s current price.
Here the grid trading bot will automatically buy when the price falls to the predetermined level and again if the price drops by another $500. The reverse will occur whenever the price of BTC starts to rise.

The basic principle of this trading strategy is to repeatedly buy at the pre-specified price, and then sell the position whenever the price rises above that level. On the other hand, you can sell at a predetermined price point and wait for the price to fall to a set level, and buy the asset repeatedly.

A grid trading strategy can be easily automated, and is valuable for crypto trading. This strategy is especially useful for traders when prices move within a specific range or a “sideways market,” where assets fluctuate within a fixed range for an extended time without going in a particular direction. Prices in this strategy fluctuate within the borders of price support and resistance.

Grid trading strategies attempt to make money whenever the price of an asset changes. However, there’s a trade-off: The more orders a grid trading system has, the higher the trading frequency and, consequently, the lower will be the profit from each order.

Grid trading bots

Grid trading bots allow traders to buy and sell crypto assets periodically at predetermined prices. This forms a grid of orders. The buy and sell orders are set above and below the current market price.

One of the frequently used types of bots in the crypto market is the Grid Trading bot. The main principle of the Grid bot is the same as that of the Dollar Cost Averaging (DCA) bot. The grid trading bot places the first buy order, and if the price moves in the opposite direction, it places additional orders. The main difference between DCA and grid bot is that each buy order will place a take-profit order separately unlike DCA robots, which place a take-profit order for all executed buy orders.

When the Grid bots trade, every buy order will place a sell order and if you have 5 buy orders, a total of 5 sell orders will be placed. Therefore, the algorithm will place the grid of limit orders spread at the same distance from each other. If the bot executes a partial order, it will set a take profit order for that part. This bot has a continuous closed loop of work. In other words, once the bot closes all sell orders, it will place a new buy order and start a new cycle again.

In each grid, the trader has to set the price manually for the upper and lower limits. And, these orders are executed by the grid bots at these predefined price intervals. This type of trading strategy works at its best for Binance futures and spot trading. This trading enables Binance users to create a trading bot that will automatically make trades based on the movements of a particular crypto asset price. The Binance trading bots work on grid trading strategy and when properly deployed, these bots will help you earn optimal gains. Let’s understand the two types of trading Binance trading bots perform on the Binance exchange:

Spot grid trading

Recently, Binance has started a grid trading strategy where the traders only take spot trades. This trading is relatively safe as it allows you to buy as much as you can afford. In spot grid trading, the bot will buy and spot positions at predetermined levels while generating profits on the capital deployed.

Futures grid trading

In this trading method, the traders can use margin and trade bigger positions. Because of larger positions, they can generate more profits. This trading works well on Binance Futures. Along with generating profits, it brings some risk too as margined trades could be liquidated.

Growlonix is one of the fastest-growing crypto trading terminals that provides Binance grid trading bots to perform trades on the Binance exchange. The platform has its own trading bots which perform amazingly on different exchanges. You can directly perform trades for different exchanges easily through this platform by making use of APIs. Binance trading bots offered by the platform works well for both the spot and futures market.

What are the benefits of using grid bots?

One of the key benefits of grid trading bots is that it allows you to trade systematically and periodically. After establishing some conditions, the bot will execute the strategy without giving it another second.

These bots are quite beneficial for beginners and are perfectly suited for a range of environments. Some of the major benefits of using grid trading bots are:
• Easy to use and customizable
• Reliable
• Enhance risk management
• Low entry point
• Versatility
• Higher automation level
• Suitable for both long-term and short-term trading
• Diversification

You can start by creating your own grid trading bot so that you can easily invest in both spot and futures trading markets.

How grid trading strategy/bot perform?

1. First, you have to choose the trading platform where you can perform trades
2. Navigate to the trading section and select the grid trading strategy
3. Now select your trading pair and customize your strategy. You can either choose AI strategy or manual strategy. In manual strategy, you have full control over the way you would like to set up the bot, and the AI strategy performs automatically.
4. In manual trading, you have to set some basic and advanced settings as follows:

Basic settings:

• Choose the lowest price on which the grid will execute orders. When the market price falls, orders will no longer be executed.
• Now select the highest price.
• It’s time to select the number of grids
• Choose the asset that you hold and want to use for grid strategy.
• Choose the amount that you wish to use for the strategy from your available capital.

Advanced settings

After clicking on advanced settings, you can explore more options:
• Trigger price
• Take profit price
• Stop loss price
• Initial price limit
• Grid order mode
After creating your grid, you can keep track of the strategies by looking at your order information.