Since the prices of crypto assets fluctuate within minutes or seconds, and the market is open 24 hours a day, it can be difficult for cryptocurrency traders to keep up with trends. For beginners, it can be difficult to react enough to these market movements to take advantage of the opportunity and profit. Additionally, delays in transactions may worsen the problem.
Traders cannot monitor all cryptocurrency exchanges and market trends around the clock to achieve optimal trading results. Fortunately, we live in the age of automation. And, for many traders, using cryptocurrency trading bots (Crypto Trading Bots) is the best option. These robots trade and execute trades algorithmically. They are very easy to use and help traders execute trades efficiently and effectively.
Traders can use different strategies to execute profitable trades. The grid trading strategy is a popular trading strategy among cryptocurrency traders. This strategy is designed to handle the volatility of cryptocurrencies and deal with market uncertainty. Let’s understand this strategy:
grid trading
Grid trading is actually a strategic tool that automatically buys and sells crypto assets at preset intervals around a preset price range to build a grid. This trading method works well in volatile markets when prices fluctuate at specific intervals. In this way, grid trading helps traders profit from smaller price changes.
This kind of trading can be carried out by utilizing a grid trading robot, which executes a series of buy/sell orders at preset intervals within an oscillating price range, buying at low prices and selling at higher prices. This type of trading occurs automatically based on preset parameters, allowing traders to earn profits.
During smooth market operations, whenever the selling price of an asset exceeds the buying price, grid trading will automatically execute low buy orders, thereby generating high sell orders, thereby bringing profits to traders. This fact eliminates the need for market forecasting. This way, traders can easily take advantage of volatile environments.
Let us understand this through an example:
Assume that the price range of BTC is between $28,000 and $25,000. Experienced grid traders will set the lower limit at just under $25,000 and the upper limit at just over $28,000. When the price drops to the lower limit, the grid robot will automatically buy.
After some time, when the price reaches the upper limit (just over $28,000), the grid robot will close the position, giving us a nice profit. Traders can even configure the robot to add and close positions.
How does the grid trading strategy work?
A grid trading strategy involves using a "price grid" of orders to place orders above and below a set price. The price grid consists of orders with increasing and decreasing prices. Let’s understand how this strategy works for crypto assets:
For example, you could place a buy order for every $5,000 below the current market price of Bitcoin (BTC) and a sell order for every $500 above the current price of BTC.
Here, when the price drops to a predetermined level, the grid trading bot will automatically buy, and if the price drops another $500, the grid trading bot will automatically buy again. Whenever the price of Bitcoin starts to rise, the opposite happens.
The basic principle of this trading strategy is to repeatedly buy at a pre-specified price and then close the position when 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 before repeatedly buying the asset.
Grid trading strategies can be easily automated and are valuable for cryptocurrency trading. This strategy is particularly useful for traders when prices are within a specific range or in a "sideways market" (where an asset fluctuates within a fixed range for an extended period of time without moving in a specific direction). Prices in this strategy move within price support and resistance ranges.
Grid trading strategies attempt to make money when an asset's price changes. However, there is a trade-off: the more orders a grid trading system has, the more frequently it trades and therefore the lower the profit per order.
Grid trading robot
Grid trading bots allow traders to buy and sell crypto assets on a regular basis at a predetermined price. This forms the order grid. Buy and sell orders are placed above and below the current market price.
One of the most commonly used bot types in the crypto market is the grid trading bot. The main principles of grid bots are the same as those of cost average (DCA) bots. The grid trading robot 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 bots is that a take-profit order is placed individually for each buy order, whereas a DCA bot places a take-profit order for all executed buy orders.
When trading with the Grid robot, every buy order will place a sell order, so if you have 5 buy orders, a total of 5 sell orders will be placed. Therefore, the algorithm places the limit order grid at the same distance from each other. If the robot executes a partial order, it will set a take-profit order for that portion. This robot has a continuous working closed loop. In other words, once the robot closes all sell orders, it will place new buy orders and start a new cycle again.
In each grid, traders must manually set upper and lower price limits. And, these orders are executed by grid robots at these predefined price intervals. This type of trading strategy is best suited for Binance futures and spot trading. This exchange enables Binance users to create a trading bot that will automatically trade based on price movements of a specific crypto asset. Binance trading bots employ grid trading strategies, and if deployed correctly, these bots will help you achieve optimal returns. Let’s understand the two types of trades executed by Binance trading bot on Binance exchange:
Spot grid trading
Recently, Binance launched a grid trading strategy where traders only trade spot. This type of transaction is relatively safe as it allows you to buy as much as you want. In spot grid trading, the bot will buy and spot positions at predetermined levels while generating profits from the capital deployed.
Futures Grid Trading
In this trading style, traders can use margin and trade larger positions. Since the positions are larger, they can generate more profits. This type of trading works well on the Binance Futures trading platform. While generating profits, it also comes with some risks, as margin trading can get liquidated.
TrailingCrypto is one of the fastest growing cryptocurrency trading terminals that offers the Binance Grid trading bot to execute trades on the Binance exchange. The platform has its own trading bot that performs well on different exchanges. You can trade on different exchanges directly and easily using API through this platform. The Binance trading bot offered by the platform is suitable for spot and futures markets.
What are the benefits of using grid robots?
One of the main benefits of a grid trading robot is that it allows you to trade systematically and regularly. After establishing some conditions, the robot will immediately execute the strategy.
These robots are very beneficial for beginners and are perfect for a variety of environments. Some of the main benefits of using a grid trading robot are:
Easy to use and customizable
reliable
Strengthen risk management
entry point low
Versatility
Higher level of automation
Suitable for long and short term trading
diversification
You can start by creating your own grid trading bot so you can easily invest in spot and futures trading markets.
How do grid trading strategies/bots perform?
First, you must choose a trading platform where you can trade
Navigate to the trading section and select the grid trading strategy
Choose your trading pair now and customize your strategy. You can choose between an AI strategy or a manual strategy. In a manual strategy, you have full control over how you set up your bot, and the AI strategy executes automatically.
In manual trading, you have to set some basic and advanced settings as follows:
basic settings:
Select the lowest price for grid execution orders. When the market price drops, the order will no longer be executed.
Now choose the highest price.
It’s time to choose the number of grids
Select the assets you hold and want to use in the grid strategy.
Select the amount of available funds you wish to use for the strategy.
advanced settings
After clicking Advanced settings, you can explore more options:
trigger price
Take profit price
Stop loss price
initial price limit
Grid sorting mode
After creating the grid, you can track your strategy by viewing order information.
If you liked this article and want to learn more about cryptocurrencies, why not follow our updates and explore this ever-evolving space with us. May you be richly rewarded on your journey ahead, but also remember to share your insights and experiences with us. Thank you for reading and I wish you all the best in the world of cryptocurrency!
