Grid Trading: The Ultimate Guide
Grid Trading: The Ultimate Guide
One form of trading, called grid trading, gives day traders an option to capitalize on trend continuations in the market by increasing the size of their position as the trend continues. In this article, we will take a look at what grid trading is, as well as look at some of the best crypto-grid trading bots that you can utilize to create a passive income stream for yourself.
What Is Grid Trading?
Grid trading is when orders are placed above and below a set price, creating a grid of orders at incrementally increasing and decreasing prices. Grid trading is most commonly associated with the foreign exchange market. Overall the technique seeks to capitalize on normal price volatility in an asset by placing buy and sell orders at certain regular intervals above and below a predefined base price.
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. This takes advantage of emerging trends. They could also place buy orders below a set price, and sell orders above. This takes advantage of ranging conditions.
Understanding Grid Trading
An advantage of grid trading is that it requires little forecasting of market direction and can be easily automated. Major drawbacks, however, are the possibility of incurring large losses if stop-loss limits are not adhered to and the complexity associated with running and/or closing multiple positions in a large grid.
The idea behind with-the-trend grid trading is that if the price moves in a sustained direction the position gets bigger which allows you to capitalize on it. As the price moves up, more buy orders are triggered resulting in a bigger position. The position gets bigger and more profitable the further the price runs in that direction.
Unfortunately, this leads to a dilemma. Ultimately the trader must determine when to end the grid, exit the trades, and realize the profits. Otherwise, the price could reverse and those profits will disappear. While losses are controlled by the sell orders, which are also equally spaced, by the time those orders are reached the position could have gone from profitable to losing money.
For this reason, traders typically limit their grid to a certain number of orders, such as five. For example, they place five buy orders above a set price. If the price runs through all the buy orders they exit the trade with a profit. All of this could be done at once or via a sell grid starting at a target level.
If the price action is choppy it could trigger buy orders above the set price and sell orders below the set price, resulting in a loss. This is where the with-the-trend grid falters. Ultimately, the strategy is most profitable if the price runs in a sustained direction. The price oscillating back and forth typically doesn't produce good results.
In oscillating or ranging markets, against-the-trend grid trading tends to be more effective. For example, the trader places buy orders at regular intervals below a set price, and places sell orders at regular intervals above the set price. As the price falls, the trade goes long. As the price rises the sell orders are triggered to reduce the long position and potentially get short. The trader profits as long as the price continues to oscillate sideways, triggering both sell orders.
The problem with the against-the-trend grid is the fact that the risk is not controlled. The trader could end up accumulating a larger and larger losing position if the price keeps running in one direction instead of range. Ultimately, the trader must set a stop loss level, as they can't continue to hold a losing (let alone make a bigger) position indefinitely.
Best Crypto Grid Trading Bots
Now that we have taken a look at what grid trading is and how it works, let’s take a look at some of the best crypto grid bots in the market.
Pionex is easily one of the best crypto grid trading bots in the industry, and one of the biggest reasons for this is because their grid trading bots are completely free for you to use. These guys offer five different kinds of built-in grid trading bots for no cost at all, and they vary based on what your needs are.
Their grid training bots let you automate grid trading strategies, which means you can set a price range, as well as the number of grids. You have to choose the percentage of funds that you would like to implement, and you can either set these yourself, or you can use their advanced AI strategy. Pionex also has a reverse grid bot that you can capitalize on, which lets you store your assets when the price is decreasing.
When it sells your allocated assets at the existing level, it will repurchase them when the price drops. If you think the price is going to drop, then you should make the most of a reverse grid bot. You will need to configure your own parameters, including the number of grids, price range, and the percentage of funds. Pionex also offers an Infinity grid bot, which is their premium version of grid trading bots.
Coinrule is another great crypto trading bot that you need to capitalize on because according to them they make automated trading really easy. They ultimately want to help their clients compete with professional traders out there, which means that they have a number of different grid bot trading strategies, as well as grid bots that can do everything for you, so that you don’t even have to think about it.
They are well connected with more than 10 popular exchanges, and they say that they offer their clients military-grade security and encryption, so you never have to worry about any of your assets being compromised in any way.
They allow their clients to create automated trading rules, and you can do this 24/7, and they, of course, have plenty of historical data based on existing and past grid bot trading strategies. This allows you to learn from the best, and work out how to implement your trades properly.
Bitsgap is another grid trading bot that you need to make the most of in the industry right now as they offer their clients a variety of different kinds of grid trading bots. They let their clients choose the grid quantity, as well as price, exchange, and their lower and upper price limits. They also let you set the percentage of funds that you would like to allocate to that trade.
They offer additional features including taking profit, stop loss, trailing up, and calculating the profit of each grid by taking away the price percentage of each grid from the trading fee percentage, for selling and buying respectively.
Bitsgap has a demo mode, which means that you can try one of their crypto trading bots for free without having to pay anything. They have a minimum investment, but this is going to depend on the parameters that you have set. They calculate the minimum deposit based on grid quantity. You also have to choose your price based on which stop loss is going to be executed. When this is triggered, all open bot orders are going to be canceled automatically.
The bot is going to sell your base currency at the best available price based on a market order.
They say that their basic package is going to cost you $19, their pro package is going to cost you $44, and their advanced package is going to cost you $110.
Quadency is another crypto grid trading bot that offers automatic grid trading strategies for its clients. They say that they ask their clients to configure the following parameters, like the number of grids, the exchange, the distance between grids, the amount per order, and when the bot should stop working.
Of course, the higher the number of grids, the higher the investment it is going to require.
There are a number of options with this crypto grid trading bot, including being able to re-create a grid around the exit price, so that you can continue trading. Another option is to cancel all options and stop the bot, cancel all orders, close your positions and stop the bot, and lastly, do nothing. This means that you do get to control a certain amount of the action, or you can choose to delegate this action to the grid trading bot.
This platform charges its clients zero trading fees, which means that you can open and close trading positions without being charged a cent. You will have to pay them when you generate a profit, and this is going to be 10% of your total earnings.
TradeSanta is another premium quality crypto grid trading bot that wants its clients to be able to trade cryptocurrency like a professional, which is why they offer trading bots as well as a powerful terminal.
They want their clients to be able to automate their trading with proven strategies, bots, and signals. And they also want you to be able to trade quicker, so that you can maximize your results. TradeSanta also has a helpful tutorial video on their website about how they work, so you can really get to know the ins and outs of their grid trading bot before you sign up for anything, and once you’ve created an account with them, you can connect to a number of supported exchanges.
They offer long and short strategies, so you can take advantage of bear and bull markets, and they also offer spot and futures trading, so you can capitalize on grid trading bots working hard around the clock for you.
Grid Trading: Conclusion
Grid trading is when orders are placed above and below a set price, creating a grid of orders at incrementally increasing and decreasing prices. Overall the technique seeks to capitalize on normal price volatility in an asset by placing buy and sell orders at certain regular intervals above and below a predefined base price.
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