After a period of looking for answers to the question “How to make a profit in the sideway market?”, I have found out a strategy called Grid Trading.
This is a strategy developed in the Forex market and now, you can use with Crypto. So in the Crypto market, what will this strategy be? Today I will be with you to learn about this Grid Trading.
You can use Gird Trading function with BitUniverse application. Learn more about BUB here:
- What is Grid Trading?
- How to make a profit with Grid Trading in Sideway market
What is Grid Trading?
Grid Trading is a trading strategy based on the movement of prices in a predefined grid model.
This strategy is quite popular and probably not too strange for those who have tried Forex & Stock market.
In general, Grid Trading techniques operate based on price fluctuations in Sideway market.
It will place Buy/Sell Orders at certain prices. This price is within a range that was originally defined.
In the simplest way, in the Grid Trading strategy, capital will be broken down in each grid. Traders will place Buy and Sell Orders at certain grid lines.
Each time Buy order is matched, Sell Order is placed above. And in contrast, whenever the Sell order is matched, the Buy Order is placed at the bottom.
Market prices only have two directions Up and Down (Sideway state is also the market up and down but with small amplitude).
The essence of this method is to “buy at low prices and sell at high prices” to generate profits, even though the market does not fluctuate much.
How to make a profit with Grid Trading in Sideway market
Grid Trading method requires us to execute Buy/Sell Orders continuously whenever the price changes through the predefined grid (Grid).
It will take a lot of time and effort for a trader to stand 24/7 waiting for a price and then place an order. Thus, this method is often used with Bot.
Principle of operation of Grid Trading method
From this part on, I will take Grid Trading Bot to demonstrate examples for you.
To illustrate this principle, let’s take the pair BTC/USDT for example. The graph above is the price of the BTC which is cropped from Tradingview.
In the pair of BTC/USDT:
- BTC: Base Currency
- USDT: Quote Currency
Our goal when using this method is to increase the amount of USDT (Quote Currency) by buying BTC (Base Currency) at a low price and selling BTC when the price is high.
After selecting Sideway price range, I install Setup for GridTradingBot with the following values:
- High Price: $4,200
- Low Price: $3,300
- Number of Grid: 10
- Amount per Grid: 0.05BTC
- Grid Level (setup levels) are: $4,200 $4,100 $4,000 $3,900 $3,800 $3,700 $3,600 $3,500 $3,400 $3,300 $3,200 $3,100
Bot will run at [START] with this time price is $4,200 USD per BTC.
In case price is lower:
- At this time, Buy Order  is placed at $4,100
- When the price goes down to exact $4,100, Buy Order  is matched. This means that the Bot used your USDT to buy 0.05BTC at $ 4,100 USDT for 1 BTC. Your total assets increased by 0.05BTC (just bought), and reduced by $205 (0.05 * 4100) USDT used to buy BTC).At the same time, Sell Order  was placed at $4,200 and Buy Order  was set at $4,000
- Prices continue to go down, Buy Order  is matched. This means that the Bot used USDT to buy 0.05BTC at the price of $4,000 USDT for 1 BTC. Total assets increased by 0.05BTC (just bought) and reduced by $ 200 (USD 0.05 * 4000) for purchasing this BTC.Also at this time, Sell Order  is set at $4,100 and Buy Order  is set at $3,900.
- . . .
In case the price goes higher
Considering at the time as marked B in the picture, the price starts going up from $3,800:
- As long as the price reaches $3,800, a Sell Order  is placed.
- Price up to $3,900, Sell Order  is matched. That means 0.05BTC is sold with the price $3,900 USDT for 1 BTC. Total assets decreased by 0.05 BTC and increased by $195 (0.05 * 3,900) due to selling 0.05BTC for $195.
At the same time, Sell Order  is set at $4,000 and Buy Order  is set at $3,800.
- The price goes up and touches the level of $4,000, Sell Order  is matched. Your total asset decreases by 0.05BTC and increases by $200 (4,000 * 0.05) due to selling 0.05BTC for $200.
At the same time, Sell Order  was set at 4,1000 and Buy Order  was set at $3,900
- . . .
As such, when prices continue to rise and fall within a set price range (from $ 4,200 ~ $ 3,300), matching buy and sell orders will help increase the USDT (Quote Currency) total asset.
More explanation for the special case as Grid =2
Some of you may still confuse about how Grid Trading works.
In this part, I will explain the most special case in Grid Trading method.
- Trading Pair: OST/BTC
- Grid lines (Grid): 2
- High Price (H): 0.00000640
- Low Price (L): 0.00000604
- The moment to apply Grid Trading method is at [START].
Total capital participated in Grid is 1000 OST. At START moment, only have BTC, not yet OST.
- At (1): You use 0.00604 BTC to buy 1000 OST.
- At (2): You sell 1000 OST to get 0.0064BTC => profit 0.00036 BTC.
- At (3): You use 0.00604 BTC to buy 1000 OST
- At (4): You sell 1000 OST to get 0.0064BTC => profit 0.00036 BTC.
- At (5): You use 0.00604 BTC to buy 1000 OST.
- At (6): You sell 1000 OST to get 0.0064BTC => profit 0.00036 BTC.
- At (7): You use 0.00604 BTC to buy 1000 OST
Please see detail in the below table:
So when you finish order (7), you get 1000 OST and lose 0.00496 BTC compared to the moment START. Is this a loss?
If with this amount of 1,000 OST, you sell at the current price of 0.00000604 BTC for 1 OST, you get 0.00604 BTC. Inferred, the total number of BTC is 0.00604-0.00496 = 0.00108 BTC. This is our profit counted to moment (7). With this way of price, profit will increase.
Note: The above is just an example to illustrate the operation principle of Grid Trading. You should explore the trading pairs yourself and make the proper decisions.
Some notes in trading using Grid Trading method
Pros of Grid Trading in trading coin
- Cryptocurrency is a market that fluctuates with a relatively large margin (more than Forex & Stock). Even during Sideway time. That makes Grid Trading a very suitable method for coin trade.
- Grid Trading in the coin trade currently has a Bot – GridTradingBot dealing with placing and matching orders. Once you have identified the Sideway price range, the rest is on the Bot. The profit will be steady without much extra effort.
- Minimize the loss that you may encounter. Splitting the capital to join each Grid will help minimize the risk of too much loss when market prices get SL.
Cons of Grid Trading in trading coin
- Effective only in the Sideway market and especially the Sideway with short wavelength and wide price range. This is understandable when you look at the price chart with short wavelengths. That is, in a shorter period of time, the more the price cuts through the grid lines, the more orders are matched.
- There are many input parameters that you need to analyze to give out the optimal Grid Trading strategy. For example, Sideway price range, Fluctuation range, Highest price, lowest (High / Low Price), fluctuated wavelength.
Since then, you can decide to set the parameters such as the number of grids, Stoploss, expectations, etc. For new players, this is not simple.
- Each coin pair has a range of fluctuations and different wavelengths. So it is impossible to install the same parameter for all pairs. Every pair needs to be analyzed from the beginning.
I hope that after this article, you bros can basically get the Grid Trading method and how it works. Any queries or comment, please feel free to raise.