With the prices of cryptocurrencies fluctuating within minutes and seconds, it’s hard for the traders to keep up. For beginners, it is not possible to react quickly enough to take advantage of profit opportunities from the rapid price swings. Furthermore, delaying transactions may worsen the investments in the future. Traders cannot monitor the market round the clock to achieve optimal trading results.
And fortunately, this is the age of automation, and experts are trading and executing transactions with the help of crypto trading bots. Trading bots have become the most popular and profitable tools in the crypto trading sphere and at the best crypto trading platforms like TrailingCrypto, you can explore a variety of trading bots like DCA bots, scalping bots, grid trading bots, and more. And, here we will discuss about grid trading bots and how grid trading strategies work to make your trading more successful and profitable.
Grid trading
Grid trading is a trading strategy that involves placing orders above and below a set price using the price grid of orders. Here the price grid consists of orders at incrementally increasing and decreasing prices. For example, a trader may set buy orders at every $500 below the current market price of any stock say XYZ, and sell orders every $500 above XYZ’s current price. The grid trading bot automatically buys when the price falls to the predetermined level and again if the price of the asset drops by another $500. The reverse occurs when the price of XYZ starts to climb.
Unlike other strategies which usually rely on technical indicators to create any kind of buy/sell signals, the grid trading strategy makes use of the price action of the market to buy at a low price and selling at a higher price. And, this could be achieved by placing multiple orders on both sides. As the price moves up or down in the grid, the filled orders will be replaced automatically with appropriate buy or sell order.
A grid trading strategy is easily automated, and valuable for crypto trading. This is especially useful whenever prices move within a specific range or a “sideways market,” where assets fluctuate within a tight range for an extended period without going in a particular direction.
Grid trading bots
The grid trading bots rely on this strategy that really works well in the sideways market. And, instead of cancelling the previous gains, grid bots take advantage of market volatility to lock in more profits. The more frequent there are fluctuations, the more profitable will be the strategy. This bot enables the traders to place a series of buy and sell orders within the defined price range, creating a grid-like formation.
While using this strategy, the crypto traders set lower and upper limits in the grid where they execute buy and sell orders. If the price drops below the lower limit, a buy order will be executed, and vice versa. Let’s understand the working of grid trading bots with an example:
If the price of any crypto asset, say ETH is $60,000. Here the trader could set a lower limit of $58,000 and an upper limit of $62,000. And, the area between these two price limits is the grid. Once the price drops to $58,000, a buy order will be executed, and when it goes above $62,000, a sell order will be executed. Here the traders can set multiple buy or sell orders at different points in the grid.
In each grid, the trader has to set the price manually for setting the upper and lower limit. And, these orders are executed by the grid bots at these predefined price intervals. The Binance trading bots also work on grid trading strategy and when properly deployed, these bots will help you earn optimal gains.
Reasons to use grid trading bots
When set up correctly, trading bots can take away some of the extra work that you would otherwise have to do manually. Here are some major reasons why you should use a grid trading bot.
Earn profits during quiet market
Grid trading bots have the unique advantage of turning a profit in the time of consolidating and variable markets, where there tends to be a lot of confusion. Rather than having your crypto assets hibernate along with the market trends, you can use grid trading strategies to capitalize on a market where you are not confident about the trades.Risk management
Using a grid trading bot allows you to configure the trade settings manually, which can impact not only your profitability, but may also impact your risk level. For example, you may opt to choose the strategy that helps you yield small but steady profits with small profits, or you can choose to go for bigger stakes and deferred returns. But with grid bots, the losses you will take don’t necessarily involve manual treatment, and therefore also your risk management will be less prone to your sentiments which play a role in the decision-making process.High automation level
Grid trading bots provide a high level of automation to traders. This is because the fundamental trading strategy is highly logical. Trading bots are designed to perform predetermined tasks unrelated to market sentiments and trends. Grid trading bots employ the grid trading strategy efficiently, which would be too intricate to execute with manual trading.Suitable for both long-term and short-term trading strategy
Grid trading strategy can be used in trading by all kinds of traders. The traders can take advantage of this trading method for managing their risks and maximizing their profits. Traders who prefer quick returns can set up the trading bot to function for short-term to earn profits from the small price movements while the long term traders can set up a huge grid range where trades can run for longer periods.