Grid trading can be described as a quantitative trading strategy that involves placing automated buying and selling orders to make a profit from the unpredictability of cryptocurrencies. Grid trading is a form of algorithmic trading that automatically executes the order by making use of grid trading bots.
To form a grid of orders that is going to cover a range of market movements, the method allows placing multiple orders at progressive price levels below and above the market price.
In general, the trading bots place sell/buy orders in between the chosen price range and construct an automated trading bot. This lets the crypto traders make profits and benefits even when there is a small change in the price and does not let them make emotional decisions. As a result, it increases the chance of making a profit in both bear and bull markets.
In this article, we are going to discuss grid trading in detail, what it is, how it works, and how it benefits the traders.
What Is Grid Trading?
Crypto prices fluctuate, and thus, the old crypto traders rely on the market charts to make their decisions. However, it is difficult to keep up with the swirling price changes, and it often issues a good opportunity for making a profit. This also has a way of creating market FOMO. it is difficult to keep track of everything that is going on in the market.
This is where the grid trading strategy comes in and helps. This is a quantitative crypto trading process. It helps me sell and buy cryptos that the trader sets. It is set to keep in mind that the price of an asset will fluctuate inside the range, and orders will also be placed in that range. This basically ensures that the trader does not face a huge loss.
What Are Gris Trading Bots? How Do They Function?
Grid trading bots are mainly codes or trading algorithms that attempt towards making profits even when the price changes inside the grid area. It is the trader who sets these parameters or limits for the bot to function in the determined range and execute the orders according to the predecided rules. Thus these bots allow automated crypto trading.
Set The Upper And Lower Limits
For instance, think that the Bitcoin price has changed from $37,020 to $15,000 in the last two weeks. The trader has 5,000 Tether, USDT $1.00, and plans to $600 below and above the range. This will make the upper limit price $15,600 and the lower limit price $14,400.
Create Multiple Levels
In the next step, the trader has to divide the inter-price limits for both upper and low into grid levels. Every exchange has its own set of rules. However, automatic and manual settings are also available for all the major exchanges like BybIt, Crypto.com, Binance, etc. In the manual mode, the trader gets to select many levels, while in the automatic mode, the grid levels get determined automatically.
Multiple Grid Level
This will ensure that you follow the predetermined limits, and the bot will allow you to function in between them. If the price crosses and rises, the Sell gris, the bots start to sell BTC and make some profit. Similarly, if the price falls in the Buy gris, the bot starts buying BTC automatically. Selling and buying continue with the ultimate aim of making profits until the trader or the timer stops the bot.
It is important that you know that the mentioned parameters are only for reference. These parameters can also change when the investment goal changes. Additionally, cryptocurrency trading always involves risk, and traders have to get used to all the possibilities before they set up grid trading.
Grid Trading Benefits
Trading cryptos can take a lot of time. The tools for automation can make it better for investors to make profitable and rational decisions. Crypto gris bots are good for these reasons:
- Automated trade execution: Grid trading uses bots that automatically execute trades depending on the rules that were predetermined, which saves time and reduces decision-making out of emotion. Traders can use these to scale their trades by making multiple bots for different pairs simultaneously.
- Rational and faster decision-making: Bots make quicker decisions than traders. Moreover, they don’t get affected by emotions, peer pressure, FOMO, and social media trends, they can continue trading even when the citation is erratic and the market condition is violent.
- Risk management: You can program Grid trading bots to close trades automatically if they have reached a certain threshold, which can protect the trader from facing potential losses. Along with that, it diversifies trading between various coin pairs and does not trade in single pairs.
Grid trading features crypto trading. Spot grid bots make a profit on the capital since they use only spot wallet funds. And if the fund is insufficient, it automatically pauses the trade. This is why spot trading is comparatively safer, as the trade is done with your own money.
Features gris bots use the margins for trading and borrow funds beyond the capital that is available. This lets traders make bigger cryptocurrency trades between extra risk exposure.