Trading Using Grid Trading Strategies

How Does Grid Transactions Work?

Markets for financial assets such as cryptocurrency, forex, stocks, ETF, futures, margin etc, trading are profoundly known as being volatile with prices fluctuating rapidly and vigorously. To capture the profitable opportunities present in such trading environments, we need to use specific techniques and tools. Over the years, traders have implemented the grid trading strategies, which were used initially in trading Forex, with trading cryptos nowadays.

 

To get the picture of how grid trading works, first, imagine a grid where you can set series of long and short orders at different intervals from the current price. By doing so, you can account for all possibilities for any breakout scenarios and be assured that in either direction the market goes, there will be a pending order to be triggered to get you into the trade. The size of the grid will then be determined by the number of stop orders, or intervals you set in each direction.

 

Nowadays, a grid strategy can be performed by using specifically designed gridbot, which all transactions can be executed automatically once the stop orders, or limits, sometimes they call them, have been set.

 

One would then be skeptic as to whether these strategies would work, or wonder are grid bots profitable. To answer these questions, let’s take a look at the functions of a grid bot closely in the following paragraphs.

 

What is a Grid Trading Bots?

 

Grid Trading Bots allows you to buy and sell orders at predetermined price intervals. The range is divided into multiple levels forming a grid. The buy and sell orders are set below and above the current price. As soon as a sell order is executed, you can place a buy order a level below it and vice versa.

 

It would be very challenging and time-consuming to apply a grid trading strategy manually. The grid trading bots help you automate the entire process and earn profits even when you are offline. It allows you to trade efficiently and works 24/7. 

 

Grid bots are perfectly suited to trading volatile assets such as cryptos, ETF, futures, margin, or stocks. For example coins that are not moving up or down with any clear direction. This is also known as ranging, moving sideways or even “chop”.

 

Grid trading bots are the easiest to create and use and are perfectly suited to beginners. If you choose your automated grid trading bot wisely, they can run for weeks, months and possibly years, returning regular profits from the initial investment capital.

 

Profits are not reinvested and are instantly released to your exchange wallet as soon as they are generated.

 

How to Make Grid Trading Work and Is Grid Trading Profitable?

 

Bots need to set up successful gird trading strategy or rules to tell them how to trade. Grid bots use a grid trading strategy that appears to have originated from the Forex markets. Essentially the strategy creates a series of buy and sell horizontal levels and the bot accumulates profit as price moves and “bounces around” within the grid.

 

The more grids you make, the higher the trade frequency will be because the grid width is decreased. But at the same time, the profit earned with each order will decrease. That means you can choose to either have many trades which earn only a small profit at a time, or a few trades which in turn make a big profit each. 

 

Whenever a buy order is triggered, a new sell order will be placed (higher than the buy). And whenever a sell order is triggered, a new buy order will be placed (lower than the sell). This means that whenever the price fluctuates between 2 grids so a trade is executed, a small amount of profit will be earned.

 

As long as the price stays within the set range, the strategy will always sell a bit when the price goes up and buy a bit when the price goes down, scalping small amounts of profit every time.

 

What Types of Financial Instruments Can Work With Grid Trading?

 

Most of the financial assets that are now available on the market can pofit with using grid trading strategies. For example, crytpos, spot trading, Forex, futures, ETFs, stocks, etc. Anything that basically exists on the market can be used as grid trading bots can be set with strategies for longing, shorting, and longing and shorting within the same strategy. As long as the market fluctuates, there will be spoortunity for profiting with using grid bots.

 

Different Grid Strategies on the Market

 

To build a safe grid strategy for longing an asset, there are a few criteria:

• It has to be in a market that has a very slim chance of going to zero.
• There must be no finance charges or negative interest for holding the positions daily.
• You must have the funds to hold all your positions to zero.

 

How it works?

 

To get the picture of how grid trading works, first, imagine a grid where you can set series of long and short orders at different intervals from the current price. By doing so, you can account for all possibilities for any breakout scenarios and be assured that in either direction the market goes, there will be a pending order to be triggered to get you into the trade. The size of the grid will then be determined by the number of stop orders, or intervals you set in each direction.

 

Grid bots are perfectly suited to trading in a market without trend, for example cryptocurrency that are not moving up or down with any clear direction. This is also known as ranging, moving sideways or even “chop”.

 

Grid bots are the easiest bots to create and use and are perfectly suited to beginners, if you choose your grid bots wisely, they can run for weeks, months and possibly years, returning regular profits from the initial investment capital.

 

Profits are not reinvested and are instantly released to your account as soon as they are generated.

 

To Long Sell an Asset

 

Simply set series of long orders at different intervals from the current price up. By doing so, you can account for all possibilities for any breakout scenarios and be assured that in either direction the market goes, there will be a pending order to be triggered to get you into the trade. The size of the grid will then be determined by the number of stop orders, or intervals you set in the uptrend direction.

 

Once the take-profit level is triggered, profits are instantly released to your account as soon as they are generated.

 

To Short Sell an Asset

 

Completely opposite to long selling grids, series of short orders at different intervals from the current price up. The size of the grid will then be determined by the number of stop orders, or intervals you set in the downtrend direction.

 

Once the take-profit level is triggered, profits are instantly released to your account as soon as they are generated

 

How it works?

 

Just like long selling an asset, short selling grids are set just the opposite way. To get the picture of how grid trading works, first, imagine a grid where you can set series of long and short orders at different intervals from the current price. By doing so, you can account for all possibilities for any breakout scenarios and be assured that in either direction the market goes, there will be a pending order to be triggered to get you into the trade. The size of the grid will then be determined by the number of stop orders, or intervals you set in each direction.

 

Grid bots are perfectly suited to trading in a market without trend, for example cryptocurrency that are not moving up or down with any clear direction. This is also known as ranging, moving sideways or even “chop”.

 

Grid bots are the easiest bots to create and use and are perfectly suited to beginners, if you choose your grid bots wisely, they can run for weeks, months and possibly years, returning regular profits from the initial investment capital.

 

Profits are not reinvested and are instantly released to your account as soon as they are generated.

 

To Perform Both Shorting and Longing in One Grid

 

The two-way techniques can be set as follows:

The grid trading bot methodically performs both buy and sell-limit orders for both scenarios based upon the individual's parameters.

 

Longing and shorting grid profit loss evaluation:

The P/L calculations for an asset long and short grid strategy cosiders about both the complete matched revenues and unmatched profit as well as loss. In this situation, completed deals are taped as matched deals, while partly completed purchases are tape-recorded as unmatched transactions. A matched deal implies that every short and long setting in the grid method is matched by an equivalent buy or sell order.

 

What Happens When the Price Exits the Top of the Grid?

 

The grid bot will automatically pause and wait for the assets, say coin prices to return back to the grid and then resumes trading. This is also a great time to stop or delete the bot and reassess if you wish to continue this grid bot or replace it with a new range or different asset pair to trade. All assets bought initially by the grid bot when it was first started have been sold.

 

What Happens When the Price Exits the Bottom of the Grid?

 

The grid bot pauses and will wait for the asset to return back to the grid to resume trading. All of the assets is now invested. This is a time to reassess if you wish to continue this grid bot or replace it with a new range. If you feel the asset being traded is likely to suffer a further drop in price, then you may wish to stop the grid bot and create a smart cover trade to sell the asset at the current chart price and buy it back lower, when it has found a bottom, before creating a new grid bot with a different range to trade.

 

What Are the Risks of Using a grid bot?

 

Grid Trading is still not a fail-safe way to trade assets. At the moment there is no such thing as “best grid bot” or “best grid trading bot” in the market. All trading strategies have risks, and even though Grid Trading is one of the lower risk strategies, here’s the risk you need to keep in mind while using a grid bot.

1. If the price goes down and never comes back up, in such a case, even the best grid bot in the world wouldn't make profits.
2. If you are not managing your buy and sell transactions effectively in a fluctuating market, or if you don't have essential order types such as stop-limit orders setup for market triggers, then you could end up losing a large amount of money.
3. It wouldn't be the grid bot's fault since it’s only acting on the settings you chose at the start. But it could still make a large chunk of your trading funds disappear if something does not work out as it was planned. Currently, there are a few known Bots that can provide trigger price, stop loss, and take profit features, which are helpful to prevent that..
4. It is essential to use the strategy with vigilance and care. Never put more money into it than you could afford to lose. Begin with low funds when you start trading with this or any other new instrument. Initiate with a low amount, then gradually increase it once you grow more confident in using the bot and what settings to choose. 

 

Now that we have talked about how to set up an effective grid strategy, it is time to talk about what types of financial assets or instruments can profit with grid strategies.

 

Cryptocurrency

 

A cryptocurrency (or "crypto") is an electronic money that can be made use of to buy items and also services, with utilizing an online journal with strong cryptography to protect on-line transactions. Much of the rate of interest in these uncontrolled money is to trade in the market, with speculators at times driving rates skyward.

 

Setting up coin-margin grid trading bots for long selling coin-margin using grid trading, doing coin-margin shorting grid, and both grid longing and shorting coin-margin, one just have to  follow the rule that has been mentioned in the above paragraphs. To do a long grid, simply set intervals above the current price on the coin-margined grid swap bot, to perform a short grid, place the intervals below the current price on the coin-margined grid bots. Goes the same for both longing and shorting in one grid. 

 

Stocks

 

A stock is a general term used to describe the ownership certifications of any company. A share, on the other hand, refers to the stock certification of a particular business. Holding a particular business's share makes you a shareholder.

 

Setting up stock grid trading bots for long selling stocks using grid trading, doing stocks shorting grid, and both grid longing and shorting securities, one just have to  follow the rule that has been mentioned in the above paragraphs. To do a long grid, simply set intervals above the current price on the stock trading grid bot, to perform a short grid, place the intervals below the current price on the securities grid trading bots. Goes the same for both longing and shorting in one grid. 

 

Spot Trading

 

Spot trades involve financial instruments traded for immediate delivery in the market on a specified date. 

 

Setting up spot trade grid bots for long selling spot trade using grid trading, doing spot trade shorting grid, and both grid longing and shorting spot trade, one just have to  follow the rule that has been mentioned in the above paragraphs. To do a long grid, simply set intervals above the current price on the spot trading grid bots  , to perform a short grid, place the intervals below the current price on the spot grid bot. Goes the same for both longing and shorting in one grid. 

 

Futures

 

Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and price. 

 

Setting up futures grid trading bots for long selling futures using grid trading, doing futures shorting grid, and both grid longing and shorting futures, one just have to  follow the rule that has been mentioned in the above paragraphs. To do a long grid, simply set intervals above the current price on the futures grid bot, to perform a short grid, place the intervals below the current price on the futures grid trading bots. Goes the same for both longing and shorting in one grid. 

 

Margin Trading

 

Margin refers to the amount of equity an investor has in their brokerage account. "To margin" or "buying on margin" means to use money borrowed from a broker to purchase securities. One must have a margin account to do so, rather than a standard brokerage account. A margin account is a brokerage account in which the broker lends the investor money to buy more securities than what they could otherwise buy with the balance in their account.

 

Setting up margin grid trading bots for long selling margin using grid trading, doing margin trading short grid, and both grid longing and shorting margin, one just have to  follow the rule that has been mentioned in the above paragraphs. To do a long grid, simply set intervals above the current price on the margin trading grid bot, to perform a short grid, place the intervals below the current price on the margin grid bots. Goes the same for both longing and shorting in one grid. 

 

ETFs

 

An exchange traded fund (ETF) is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same way a regular stock can. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities. ETFs can even be structured to track specific investment strategies.

 

Setting up ETF stocks grid trading bots for long selling ETF using grid trading, doing ETF stocks shorting grid, and both grid longing and shorting ETF, one just have to  follow the rule that has been mentioned in the above paragraphs. To do a long grid, simply set intervals above the current price on the ETFs grid bot, to perform a short grid, place the intervals below the current price on the ETF stocks grid trading bots. Goes the same for both longing and shorting in one grid. 

 

From there, you can effectively learn more from experience and make informed decisions when using the grid trading method for certain ass
ets and situations.