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What is Futures grid trading?
Futures grid trading is a trading bot that automates the buying and selling of futures contracts. The bot is designed to place orders in the market at preset intervals within a configured price range. Futures grid trading is ideal for volatile and sideways markets when prices fluctuate in a given range. This technique attempts to make profits on small price changes.
Long/short grid trading is a popular algorithmic trading strategy that enables users to trade with the market trend within a grid trading system using a trading bot. With this bot, traders can choose whether to open an initial position (long or short) or create a grid without opening positions, based on their analysis and simultaneously place buy-limit and sell-limit orders at predetermined intervals to capitalize on market volatility and ranging conditions.
For example, a trader could open an initial long position in BTCUSDT to express his bullish view on Bitcoin. He can set up the Grid Trading Bot to place buy orders at every 1,000 USDT below the market price of BTCUSDT, while also placing sell orders at every 1,000 USDT above the market price of BTCUSDT. This allows him to trade with the underlying trend within a grid trading system.
For long and short grids, you can choose whether or not to open the initial position during grid creation. If you choose to open an initial position, a long position will be opened on long grid and a short position on the short grid. The neutral grid does not initially open positions.
How can having an initial position affect your long/short grid?
When you have an initial position opened: If the direction of the market is accurate based on the grid opened, you can potentially make more profits. However, if the market goes in the opposite direction, you can also potentially include more losses. The long and short grid does not initially hold a position, so it does not have this feature.
When you don’t have an initial position opened: In this case, the set up will be similar to a neutral grid. Neutral grids may buy first and then sell, or sell first and then buy, depending on the market trend. On the other hand, the long grid will buy first before selling, while the short grid will sell first before buying.
How to set up a Futures Grid Trading Bot?
The grid trading bot systematically executes buy- and sell-limit orders based on the parameters you set. Here’s how you can set up your first long/short grid trading bot.
1. Log in to your Binance account and go to [Derivatives] - [Binance Futures Overview]. Click [Trading Bots] - [Futures Grid].
You can also access the Futures Grid Trading interface from the Binance Futures homepage by clicking [Trading Bots] - [Futures Grid].
If you’re using the Binance App, go to [Futures] - [USDⓈ-M Futures] or [COIN-M Futures]. Select a trading pair and tap [Grid] at the bottom left.
2. The first parameter you must select is the contract on which the trading bot will be deployed. In this example, we will be using the BTCUSDT perpetual contract.
3. Enter the parameters of your long/short grid trading bot on the grid trading panel. The key parameters that you must include are:
The upper and the lower boundaries of the price range;
The number of orders to be placed within the configured price range;
The width between each grid order;
Initial margin.
If the current market price exceeds the grid trading range, the Futures Grid Trading Bot will start without any position.
4. Assign the initial margin of the position. The system will calculate your initial margin value based on the number of grids, leverage, and price range you set. Note that the denser the grid, the greater the corresponding initial margin.
Please note that the notional value of each grid order must meet the minimum requirement. You can reduce the number of grids or increase the initial margin to ensure that each grid’s minimum notional value is met.
Insufficient Initial Margin Reminder
When the initial margin is lower than the minimum requirement, you will be notified to meet the minimum initial margin required to activate the grid trading bot.
Please ensure that your margin balance is higher than the maintenance margin to avoid liquidation.
5. Click [Create] to place your grid order.
Advanced Settings
Trigger Price
The grid trading bot also comes with enhanced functions that enable you to manage your positions and risk better. One of which is the trigger price. The trigger price is a predetermined price level at which the grid trading bot will be activated. This allows you to dictate when the system will be active when market conditions meet your criteria.
When a grid trade is triggered, the system divides the asset price range into several grid levels according to your parameters and sets pending orders for each price level. When the asset’s price falls, a buy order is executed, and a sell order is placed immediately at a high price. When the price rises, a buy order is placed directly at a lower price as soon as a sell order is executed. This bot sets you up to buy low and sell high, allowing you to profit in volatile market conditions.
Stop-Loss
Additionally, you can set a stop-loss for your grid positions. Once the asset’s price crosses below or above the stop loss range, your entire grid position will be closed. This feature protects your position from incurring outsized losses when the market behaves unfavorably.
You can also set whether or not you want to keep the position open when the grid stop-loss triggers the termination.
Open a Position on Creation
If you enable [Open a position on creation], the system will automatically open position at market price when the grid is created; when disabled, the system will not open position for you after the grid is created. This feature is only for non-trailing grids.
To monitor trading activity, click the [Running] tab to find grid trading details.
To end the grid trading system, click [End].
USDⓈ-M Futures Short Grid Example
Consider a short grid bot with a configured price range between 9,800 USDT to 10,200 USDT and a grid quantity of 4.
Assuming that the quantity of sell-limit orders at each price is 1, and the market price (the latest transaction price) is 10,010 USDT.
With an initial position opened:
The following scenario shows how a short grid with an initial position will be activated.
Price
Direction
10,200 USDT
Sell
10,100 USDT
Sell
10,000 USDT
Sell
9,900 USDT
Sell
9,800 USDT
Sell (not activated)
In this case, the lowest sell-limit order (9,800 USDT) is excluded, and the subsequent sell orders are placed upwards from 9,900 USDT to 10,200 USDT. If the initial position is transacted between the prices of 9,900 USDT and 10,000 USDT, the initial number of grid orders will be 2.
Since the current market price is 10,010 USDT, the sell orders at the prices of 9,900 USDT and 10,000 USDT will be filled as the initial position. Once the initial position is filled, a buy order will be placed at the next lower price. The grid limit orders will be updated as follows:
Price
Direction
10,200 USDT
Sell
10,100 USDT
Sell
10,000 USDT
-
9,900 USDT
Buy
9,800 USDT
Buy
To summarize, for short grid bots with an initial position, the first sell-limit order will trigger the initial short position. Simultaneously, the subsequent sell-limit orders will be populated in ascending order toward the highest boundary of your configured grid. Then, the buy-limit orders will be placed in the market once the initial short position is triggered, according to your bot’s parameters.
Similarly, long grid trading bots will be activated once the first buy-limit order is filled. Subsequently, all grid orders will be populated.
With no initial position opened:
The following scenario shows how a short grid without an initial position will be activated.
Price
Direction
10,200 USDT
Sell
10,100 USDT
Sell
10,000 USDT
-
9,900 USDT
-
9800 USDT
-
In this case, since the current market price is 10,010 USDT, only the 2 sell orders above the market prices of 10,200 USDT and 10,100 USDT will be placed and no buy orders will be placed, so there is no initial position opened. If the market moves up to 10,110, the sell order at the 10,100 price will be filled, and a short position is opened. The grid limit orders will be updated as follows:
Price
Direction
10,200 USDT
Sell
10,100 USDT
-
10,000 USDT
Buy
9,900 USDT
-
9800 USDT
-
In summary, when creating a short grid and choosing not to open an initial position, the initial pending order may be less than the total number of grids, and only sell orders will be placed above the market price.
The logic of the long grid is similar, only buy orders below the market price will be placed initially.
Notes:
The initial pending orders of the grid are less than the total number of grids, and all pending orders cannot be viewed;
If the market fluctuates in the opposite direction, you may miss the market due to not opening a position at the beginning.
Long/Short Grid activations and immediate orders
How grid orders are set?
Common rules
When activating a grid strategy, the number of grid lines you configure determines the number of orders that will be placed across the price range.
For example, if you activate a grid strategy with 12 grids, 12 orders will be placed within the price range at equal intervals.
The space between the orders is calculated based on the overall price range set for the grid, the number of grid lines specified, and whether the arithmetic or geometric grid spacing is used.
How initial order placements in long/short grids differ from neutral grids?
Neutral grids spread orders evenly above and below the current market price when activated. This means the first order triggered will establish a new long or short position depending on price movement. If the price goes up, it will trigger a sell order, starting the grid with an initial short position. If it goes down, it will trigger a buy order, and the grid strategy will start with a long position.
Unlike neutral grids, Long grids (with an initial position opened) will place only buy orders above the current price when activated (T+0). This aims to immediately build a long position as high buy orders get filled near the last price at the time of grid activation. The filled buy orders are then replaced with sell orders (T+1).
Following the same logic, Short grids (with an initial position opened) will place only sell orders below the current price when activated to establish a short position. It aims to immediately build a short position as low sell orders get filled close to the last price at the time of grid activation (T+0). The filled sell orders are then replaced with buy orders (T+1).
Long orders above the last price will likely be executed upon activation at a price close to the last price, building up a long position size that is equal to the combined order sizes of the initially executed orders. (T+1)
The executed long orders will then be automatically replaced by sell orders, reflected in the grid preview.
Please note that the grid preview reflects the grid orders at T+1, not at T+0. You’ll see a combination of buy and sell orders in the grid preview on the candlestick chart, instead of the initial order set immediately post grid activation (corresponding to T+0).
The logic behind the initial order placement allows long grids to establish an initial long position by having buy limit orders filled close to the current market price. If an uptrend is anticipated, the long position built from these limit orders can then be sold at higher price levels within the grid range for profit.
Similarly, short grids establish an initial short position by having sell limit orders filled close to the current market price. If a downtrend is anticipated, this short position can then be bought back at lower prices within the grid range, allowing the short position to be closed at a more favorable price.
Example
You've set up a long grid on ETHUSDT and chose to have an initial position:
ETHUSDT price: 1,650.70 USDT
Number of grid: 5 (arithmetic)
Initial investment: 100 USDT
Price range: 1620 - 1800 USDT
As this is a long grid made of 5 grids, the system will start by placing 5 buy limit orders upon grid confirmation to build an initial long position.
Given the range and ETHUSDT price at grid activation, 4 out of these 5 limit orders are placed above the last price at the time of grid activation (T+0).
This causes the 4 limit orders above current market price to be executed immediately, building up your initial long position.
Right after, the filled buy limit orders are automatically replaced by sell orders, which are in turn placed on the upper grid (T+1).
Pending grid trading bot ordersGrid trading bot orders preview on the candlestick chart
The initial long position size at T+1 is therefore composed by the number of grids above the current price, corresponding to the initial buy limit orders that have been executed.
Reflecting the 4 buy market orders, your initial position size will then be 4 * 0.027 ETH = 0.108 ETH, equivalent to 178.28 USDT as initial entry price of 1,650.72 USDT.
How to calculate long/short grid profit and loss?
The profit and loss calculation for a long/short grid trading bot considers both the total matched profits, the unmatched profit and loss, and the funding fees of the position. In this case, completed transactions are recorded as matched transactions, while partially completed transactions are recorded as unmatched transactions. A matched transaction means that every short position (or long position) in the grid trading bot is matched by a corresponding buy order (or sell order).
Index
Definition
Methodology
Unmatched PnL
The profit and loss of unmatched grid transactions
Unrealized PnL is calculated based on the difference between the last price and the entry price of open positions. You can find your unrealized PnL and entry price under the [Positions and Orders] window.
3. Calculate the total profits
Total profits = Net Realized Profit + Unrealized PnL + Funding Fees
= 0.38535442 + 0.26 + 53.5 * 0.01%
= 0.65070442 USDT
4. Calculate the unmatched profits
Unmatched profits is the unrealized profit of filled grid orders that are not matched.
Positions are matched using the First-In-Last-Out (FILO) methodology. Under FILO, orders that are filled first will be matched last.
Example
Suppose a long grid trading bot is filled in the following order:
Price
Direction
Sequence
10,200 USDT
Buy
1st
10,100 USDT
Buy
2nd
10,000 USDT
Buy
3rd
The corresponding sell orders to be matched will be in the following sequence:
Price
Direction
Sequence
Matched Sequence
10,200 USDT
Buy
1st
3rd
10,100 USDT
Buy
2nd
2nd
10,000 USDT
Buy
3rd
1st
The last buy order (10,000 USDT) will be matched with a corresponding sell order at 10,100 USDT, and the remaining buy orders will be matched at a higher selling price.
