What is a Grid Trading Bot?

Photo by Austin Distel on Unsplash

What is Grid Trading Bot?

A Grid Trading Bot is a trading bot that assists you in carrying out the Grid Trading Strategy.

It enables you to place a series of purchase and sell orders within a given price range. When a sell order is fully executed, the bot instantly places another purchase order at a lower grid level, and vice versa.

What is Grid Trading?

Grid trading is a trading method that comprises placing a series of buy and sell orders at predefined intervals around a fixed price. It develops a commerce grid in this manner. 

Grid trading works best in a competitive market with regular price variations. It assures profitability each time the selling price surpasses the purchase price during a lateral price movement by automatically executing low purchase orders that lead to high sell orders, hence eliminating the need for market forecasting.

A variety of factors must be considered in order to enhance grid trading earnings. What if I told you that there is a method for you to profit from this volatility? What if you could automate your trades and just sit back and watch your earnings roll in on a regular basis? 

A pair with frequent and large ups and downs, but a rather constant average price over the long term, for example, is almost certainly a strong choice for Grid Trading. With that stated, let us go through the essentials.

Disclaimer : Throughout this article I have used referral links. Most of these services gives you additional discounts if you use referral links.

5 Benefits Of Using a Grid Trading Bot

1.Trustworthy Crypto Trading Strategy
Grid Trading has been around for a long time and is a well-established, well-tested, and profitable trading approach. There are several instances of successful traders employing it for decades on a variety of marketplaces. The crypto business, in particular, has shown to be one of the most trustworthy venues for Grid Trading methods due to its extreme volatility.

2. Usability
The strategy is straightforward to understand and use because it does not contain any sophisticated calculations, measurements, or market indicators. It will be simple to set up for entities with no past expertise in the crypto trading markets.

3. Adaptability
Grid Trading applies the most fundamental trading concept (buy low, sell high, earn the difference), therefore it can be applied to nearly any market and effectively generate a profit, independent of trend or market behaviour.

You may actively determine the frequency and period of the strategy by selecting the price range and number of grids.

Grids can be set up for the short term, getting hundreds of trades every hour to capture micro profit from all of the day’s minor changes, or for the long term, by selecting a large range and leaving it to run for months to gain profit from every larger trend shift.

4. Enhance Risk Management
The freedom to pick your grid strategy allows you to control the risk/reward level more actively than in most other types of trading. You may use a GRID Bot to generate a consistent modest profit with almost little risk (for example, by picking a stablecoin pair like BUSD/USDT), or you may take higher chances for potentially massive rewards (e.g., with a low market cap coin that has high fluctuations)

5. Automated trading
Grid Trading is particularly open to automation because to its evident logic and the fact that all of its actions are predefined and unrelated to market behaviour. Not only that, but using Grid Trading with a Trading Bot is considerably easier and more efficient than trying to follow the strategy with manual trades.

It’s one of the greatest methods for traders looking to take their initial steps towards automation since it can operate on practically any market, in any condition, 24/7, and can be set for almost any timeframe.

Key things you should know before running a grid bot

Photo by MinuteKEY on Unsplash

Fees are a vital consideration since they constantly have an influence on your trading results. Exchanges with minimal costs, that offer periodic zero-cost events, or give fee refunds that you may obtain as a market-maker, have a significant influence on your grid trading.

Find the best pairs and market circumstances you can and learn how to read the market, look through charts, and acquire a feeling of what you need to search for.

Look for charts with a sideways or modest uptick, but make sure you don’t observe any indications of a long-term downturn.

Look for a pair that has already seen frequent and significant price swings, but that also does not appear to be about to exit your price range anytime soon.

5 Best Crypto Grid Trading Bots

 1. KuCoin

Kucoin is a Chinese cryptocurrency exchange that was founded in August 2017. It offers an excellent list of trading pairings. It has been trading in 432 markets over the previous 24 hours, with a total trading volume of $25 million. It also provides a sophisticated API that enables users to create a secure and automated trading strategy. Follow r/KuCoinTradingBot for more insights.

Fees : 0.1% trading fee for maker and taker.

Price : No subscription fee is needed for the trading bot.

2. 3Commas

3Commas is one of the greatest cryptocurrency trading bots, allowing you to boost earnings while decreasing losses and dangers. This platform allows you to benefit with little effort. It allows you to build a strategy based on more than 20 trading indicators.

Price : Pricing plans start at $14.5/month for the Starter license and caps out at $49.5/month for the Pro license. Start your free trial here.

3. Bitsgap

Bitsgap is one of the top bitcoin trading bots that allows you to easily manage your crypto holdings. This tool can evaluate over 10,000 cryptocurrency pairs and choose the coin with the most potential. It allows you to build your bot strategy with only a few mouse clicks.

Price : Pricing plans start at $19/month for the Starter license and caps out at $110/month for the Pro license. Start your free trial here.

4. Pionex

Pionex is the world’s first exchange, offering 12 free trading bots. Users may automate their trade 24 hours a day, seven days a week without having to check the markets. It is one of the largest Binance brokers, aggregating liquidity from Binance and Huobi Global.

Fees : 0.05% trading fee for maker and taker.

Price : No subscription fee is needed for the trading bot.

5. Huobi Global

Huobi is one of the major cryptocurrency exchanges situated in Asia and serving Asian customers, having been in business since 2013. Huobi Worldwide, its global crypto exchange giving an attractive platform to trade cryptocurrency — with extensive support for numerous altcoins and a big range of stablecoins, alongside its own innovation — HUSD, a USD-backed stablecoin — has just undergone some branding changes.

Fees : 0.20% for both takers and makers.

Price : No subscription fee is needed for the trading bot.

What Could Go Wrong With Grid Trading Bot?

Scenario 1: If prices go above your range, the grid bot would’ve sold all the position & you won’t be able to benefit from the rising price. In this case, it would’ve been better to just buy & hold.

Scenario 2: If prices go below your range, It’ll use all the funds to buy the coin & will generate losses as the prices go below your range. In this case, even the best grid bot in the world wouldn’t make profits easily.

Best Strategy For Grid Trading Bot?

According to KuCoin’s article:

Actually, the profits from Grid Trading consist of two parts: grid profits and floating returns. The grid profits will always be positive as it is the returns from Buy Low and Sell High. This part is also our main source of income when executing Grid Trading. Floating returns might be both positive and negative as it is decided by the price changes of the token chosen. If you believe that the token price will gradually go up in the long turn, the floating return will also be positive. This also teaches us that choosing a token whose price may recently go down for grid trading is not that smart.

As all grid traders are focusing more on the grid profits, here are some ways to increase this part of earnings:

A reasonable starting price: You’d better enter the market at a relatively low price as the decline of the token price will result in floating losses.

A reasonable price range: If the price range is too vast, your funds won’t be effectively utilized, while when it’s too small, even small price fluctuations can drive the bot to leave the range.

A reasonable number of grid: When the grid is too tight, the profits in a single grid will be quite low, barely covering the trading fee in the worst case; but when set too wide, the funds cannot be fully utilized.

So all in all, a smart grid trader will set up a reasonable grid that maximizes fund utilization based on historical volatility, their own funds, and trading costs.

Conclusion

Grid trading is unaffected by human emotions and is entirely determined by code. Grid trading will create orders at progressively increasing and dropping prices to profit from market volatility by understanding market dynamics. Individual investors will profit from the market’s price disparity as a result.

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