A Quick Guide to Automated Bot Trading

It is possible to have the crypto assets you are holding generate passive income. Even small investments can be profitable.

TL;DR: Access free grid-trading bots here.

Introducing Grid-Trading Bots

The concept of a ‘grid-trading bot’ sounds complicated at first but it’s not hard to understand with some explanation.

Whether you have tried actively trading crypto assets or not, the thought of managing a trading account with multiple coins is too much for many. If you have observed how prices fluctuate you have likely realized that if you sell an asset when its price is high you can buy back in when the price goes down to get more of the asset at a lower price.

It’s a simple premise but hard to execute in practice. 

Herein lies the value of Grid-trading bots.

What is Grid-Trading?

Grid-trading involves placing buy and sell orders at regular intervals (“grids”) between a specified high and low price of a given asset.

The range between the high and the low price is called a “trading channel.”

As the price of the asset moves up and down within the channel it will cross various “gridlines” and trigger buy and sell orders. As long as the price stays within the upper and lower price limits you have defined, you will be able to profit from the rhythms of the market.

Trying to do grid trading manually is extremely hard. Placing multiple orders and replacing them once they have been triggered takes significant time and energy.

Grid-Trading Bots

Grid trading bots automate the process. They are tools that automatically place buy and sell orders at set price points and replace them when they are executed. You simply need to manage the upper and lower price limits in the trading channel, decide how many grids you want, and how much of the asset to use. Once these parameters are set the bot can be started and you can sit back and watch profits add up.

As the price of an asset moves up and down within the channel, the bot will execute trades. Each time the price moves up over a grid line the bot will execute a sell order. Each time it moves down over a grid line it executes a buy order.

At the most basic level, this is all you need to know to start using Grid-trading Bots.

I recommend using Pionex exchange. It has the largest selection of coins and types of bots to choose from. It also offers spot and margin trading, as well as other structured investments. It is currently giving new users a trial fund of $1288 to try out its products.

Getting a Bot

Step 1: Sign up here.

Step 2: Redeem the trial fund and test out an investment product.

Step 3: Buy crypto with a credit or deposit the coins you are currently holding.

Step 4: Start a bot.

Go to the trade screen (button in the top left of the screen). On the right of the screen there is a window where you can choose different types of bots.

There are two options. You can set your own parameters for a bot, or use pre-set AI-test bots. If you’re just starting out with grid trading it isa good idea to use the bot templates available in the app.

Bot Settings

It is also possible to set the parameters of the bot yourself. If you want to try setting your own bot parameters here’s what they mean:

• Upper limit: The top of the trading channel 

• Lower limit: The bottom of the trading channel

• Stop-Loss: If you use stop-loss it *must* be set lower than the low price of your channel

• Grids quantity: The TOTAL number of gridlines. This includes the top and bottom price of the trading channel.

• Quantity per grid: The amount of the asset to use in each trade.

• Available balance: The amount of the base currency you currently hold.

• Required balance: The amount of currency you need to run the bot using the current settings.

• Profit per grid: The % profit you will make with each sell order.*

NOTE: The profit per grid % must be higher than your exchange trading fee multiplied by two.

The exchange you use charges a fee on buy and sell orders. Some exchanges charge higher fees than others. It’s important to take these fees into account or else you could end up losing money with your bot.

Kucoin charges 0.1% for each sell and buy order. This is a total of 0.2% per grid trade (buy low/sell high). Therefore, profit % on one grid must be higher than 0.2%. If it is lower than the trading fee multiplied by two, the bot will slowly lose money.

Pionex's maker and taker fee are both set at 0.05% of the total trade.

Step 5: Click “create” and watch your bot profits trickle in!

Increase Profitability and Reduce Risk

Now you have a grid-trading bot to grow your account balance. If you want to earn BTC (for example) by trading ETH you would create a bot for an ETH/BTC trading pair. Once you click create, the bot will execute all of the buy and sell orders for ETH using BTC that correlate with the grids. All buy orders above the current ask price of ETH will be filled — effectively “buying low” against an upward move. 

Limit buy orders will be placed below the current ask price at the gridline intervals. Limit sell orders will be placed above the current ask price at the gridline intervals.

If the price of ETH moves up the bot will sell the base currency increasing your position BTC while reducing your position in ETH. If the price moves down your limit buy orders will be filled, increasing your position in ETH while reducing your position in BTC.

Important! 

If your goal is to get more of the base currency it is important to set your trading channel wide enough to capture large price movements. 

For example, the top grid line of your trading channel represents the final sell order. If the ask price of ETH exits this setting you will be left with all BTC while the value of ETH continues to increase. If the ask price returns down into the range of the trading channel the bot will resume trading. 

If the ask price drops below the low price setting of your trading channel you will be left holding ETH. This isn’t a problem if you were planning to hold ETH anyway. You can use the BTC profits generated from the bot to buy more ETH at the lower price. If the bid price returns to the channel the bot will resume trading. 

However, if you are using the bot to trade a currency you don’t want to be left holding you can set a stop-loss order that will immediately sell all of your ETH for whatever price you have set. It is important this price be below the bot’s low price setting.

Conclusion

Bot trading might seem overwhelming at first but it is not difficult. Here are my final tips for those starting with bot trading.

If you are a beginner to bot trading I suggest not using stop-losses and only use currencies that you already hold or intend to hold anyway.

Start with a Pionex trial fund of $1288. It is free and trading this way will provide valuable experience with no risk. Plus, you get to keep all the profit earned using the trial funds.

Disclaimer: Trading cryptocurrencies involves risk. This is article is not financial advice. I am not a financial advisor. I am just a member of the cryptocurrency community sharing my experience. Never invest anything you are not prepared to lose.