Grid trading requires a lot of discipline and patience, as profits may be small and take time to accumulate. Also, this strategy only requires a little trader input so trading can become boring. Using automation can save time and effort and make strategy easier to follow. In addition, using automation allows traders to trade multiple markets at once.
Advanced traders can manually adjust and configure grid parameters, which can help you profit from a pre-determined price range. Binance Futures offers an auto parameters function that allows anyone to create a grid trading strategy with just one click. By automating the process of buying and selling futures contracts, traders can carry out their trading strategy without making emotional decisions. Grid trading automates the buying and selling of futures contracts by placing orders at preset intervals within a configured price range. For example, a forex trader could put buy orders every 15 pips above a set price, while also putting sell orders every 15 pips below that price. They could also place buy orders below a set price, and sell orders above.
In addition, traders can set new grid levels sequentially if the market price moves into a new range, executing new trades with automatic take profit and stop loss levels. To set up the grid, the trader first needs to decide on a reference price. In the above example of a sideways market, buy orders should be set below the reference price. Each buy order has a corresponding sell order set at levels above the buy orders. Visually, the price levels resemble gridlines on a grid; hence, the name grid trading. Grid trading bots can automatically execute trades based on predetermined rules, which can save time and reduce emotional decision-making.
For example, in a falling market, if the profits from the short positions exceed the losses from the long positions, then the overall result is a gain. Grid trading bots are trading algorithms or codes that attempt to make profits from price changes within the predefined grid area. The trader sets up the parameters or limits for the grid trading bot to function within the predefined range and execute orders as per forethought rules. Grid trading is a quantitative trading strategy that involves placing automated buy and sell orders in an attempt to profit from the volatility of cryptocurrencies. Grid trading is a style of algorithmic trading that automates order execution by utilizing grid trading bots. Users can optimise their grid trading strategy by adding risk-management tactics like stop-losses, a hedge grid, and position sizing.
A stop-limit order is a conditional trade over a set time frame that combines features of stop with those of a limit order and is used to mitigate risk. A stop order is an order type that can be used to limit losses as well as enter the market on a potential breakout. Please note that the availability of the products and services on the Crypto.com App is subject to jurisdictional limitations. Crypto.com may not offer certain products, features and/or services on the Crypto.com App in certain jurisdictions due to potential or actual regulatory restrictions. There are two options for constructing the grid — arithmetic mode and the geometric mode. The arithmetic mode creates grids with an equal price difference, while the geometric mode creates grids with an equal price ratio difference.
Reasons Why You Need to Use a Grid Trading Bot
The more grids you have, the greater the number of trades you have; however, the profit from each trade will be smaller. This is essentially a balancing act between making small profits from many trades or making larger profits from fewer trades. To profit from trends, place buy orders at intervals above the set price, and sell orders below the set price. This will result in the following predefined limit within which the grid trading bot will now function.
Let’s take a hypothetical Bitcoin/Tether trade example to understand how a grid trading bot works and what parameters are taken into consideration. It is important to ensure sufficient funds are available in your wallet before setting up the grid. It’s essential to place stop-loss orders to limit potential losses, as when the market changes from trading a range to trending, the market can move quickly. Therefore, a stop-loss order should be placed when you enter a position. It’s advisable always to set a maximum risk exposure for each trade and ensure that the total risk exposure for all open trades does not exceed a certain percentage of the trading account balance.
The trader has 5,000 Tether and decides to trade $600 above and below the range. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility. Users can use Auto mode to set up a Grid Trading Bot in seconds or fine-tune the parameters for their bot with Advanced mode. This applies to all trading pairs in the Crypto.com Exchange, including popular ones like ETH/USDT, BTC/USDT, and ETH/BTC.
Since the market may not move in the way that the grid was initially set up to take advantage of, risk management helps to mitigate losses stemming from this. It is important to note that all the above parameter settings are for reference only. The parameters may change depending on one’s investment goals and risk-return trade-off. Moreover, crypto trading involves risks, and traders must acquaint themselves with all possibilities before setting up grid trading. As the market moves up and down within the defined range, the orders are triggered, and profits are realized on each closed order.
To ensure profitability, it is important to be selective with the market conditions appropriate for your strategy. The next step is to divide the interval upper limit price and interval lower limit price into grid levels. Each exchange has its rules; however, manual and automatic settings are available across all major exchanges, such as Binance, Crypto.com, ByBit, etc. In manual mode, the trader may select levels, and in the automatic mode, grid levels are determined automatically. Trending markets are unsuited to grid trading as when the market moves in one direction; it is difficult to exit your trades with a profit. In addition, when the market breaks out of a range, the market can move quickly in one direction, and losses can accumulate quickly.
How to Use Grid Trading on Binance Futures
Always remember that grid trading strategies can carry significant risks, particularly in trending markets, and proper risk management techniques should be employed to limit drawdowns and protect your trading account. A hedge grid trading strategy places both long- and short-sell orders inside the same grid. This enables the strategy to potentially profit no matter whether the price rises or falls.
Grid trading involves placing a series of orders at fixed price levels, usually at equal intervals, with a fixed take-profit and stop-loss level for each order. Grid trading is a trading strategy that involves setting predetermined prices for buy-and-sell orders, which are automatically executed. Ultimately the trader must determine when to end the grid, exit the trades, and realize the profits. While losses are controlled by the sell orders, also equally spaced, by the time those orders are reached the position could have gone from profitable to losing money. Another important aspect to take into account when using a grid trading bot is the trading fees. If the trading fees on the exchange are high and the grid trading bot executes several transactions quickly in a short period, then the trading fees can add up and eat into the overall profits.
What Is Grid Trading?
The counterintuitive thing about the GRID strategy is that the price of a coin has to go up and down, so it sells when it’s high and buys when it’s low. Instead of spending hours studying charts to profit from market moves, GRID bots will buy low and sell high for you. They make consistent profits without the use of any complicated algorithms but simply work off of the grid parameters that you assign to them. Our GRID bots work according to this strategy, they keep generating profits from any market movement while you are away from your computer. All the grids are interchangeable; for every completed buy order, the bot will create a new sell order above the executed price, and vice versa. The above are general examples of how grid trading strategies are typically deployed.
Also, it’s worth considering using position sizing to limit the size of each grid order and ensure that the total size of all open grid orders does not exceed the trading account balance. For instance, trade one lot per entry with a maximum position of 3 lots. A trading grid is constructed by systematically placing limit orders at intervals within a pre-established price range. Cory is an expert on stock, forex and futures price action trading strategies.
A grid trading strategy is a technique used by traders to enter and exit positions in a market by placing a grid of pending orders with predetermined price levels. Rather than trying to predict the market’s next move, the strategy aims to generate profit by capturing small price fluctuations over time, regardless of the market’s overall direction. This is where the grid trading strategy may be helpful as a quantitative crypto trading method. Grid trading helps in buying and selling cryptocurrencies in a range set by the trader.
For traders trading in multiple crypto assets and on multiple cryptocurrency exchanges, things get complicated, and constant monitoring becomes a difficult task. Users can set many, or just a few, price levels in the grid, depending on their personal preferences and circumstances. Grid trading can also be combined with other trading strategies; technical analysis is one of the most common. Users can consider combining their knowledge of technical support and resistance levels, and use trend lines as a reference for where to set the price levels in the grid. Grid trading only requires price as the input, unlike fundamental analysis, which requires continual deep dives into and monitoring of sector dynamics, valuations, growth drivers, financial projections, quality of teams, and much more. Moreover, once the appropriate price levels have been initially set, the strategy theoretically runs itself without involvement from the trader, and there is no need to constantly monitor the market.
If the price runs through all the buy orders they exit the trade with a profit. This could be done all at once or via a sell grid starting a target level. The idea behind with-the-trend grid trading is that if the price moves in a sustained direction the position gets bigger to capitalize on it.