Grid Trading bot is a well-known investment tool that focus on market volatility rather than market trend. No matter how the next price movement will be, grid bot can automatically make profits from ups and downs of the market price. Forex market is the early adoption of Grid Trading strategy, moreover, the characteristic with high volatility of cryptocurrency made it becomes a lucrative choice by using grid bot.
Why should you use Grid Trading Bots?
Grid Trading strategy is simple, easy to use, and time-saving. Not only is grid bot a cost-effective strategy but also a best solution to critical problems that investors experienced.
Humanity of investment and market trend is seriously a hurdle to participate in investing, if you desire to win. So long as you invested in any asset, you may have unforgettable history about pending your orders, analysis any market shake or even struggle yourself into the emotional decisions. In some cases of emotional decision, you sell-off positions when market crash or execute one-time investment when market surge.
The base layer of Grid Trading mechanism is aiming to settle those problems you face during investing in crypto-asset. Based on the fact that when using grid bot, your investment do not necessarily rely on market trend analysis, it only needs to define the ideal investment scope and risk control. At the same time, bot can automatically execute transaction orders to capture market fluctuations without being disturbed by human factors.
Especially the cryptocurrency, high volatility originated from exponentially growth. The Grid Trading bot can be the best tool stay with you for profits. So, why not buy low and sell high with grid bot?
What is Grid Trading Bots?
Grid Trading bot is an automated investment tool that designed to investing unmanually within the predefined parameters, and due to the horizontal structure of orders seems to be a grid, so that’s the name come from.
Grid Trading is a trading strategy which allows you to buy and sell orders at predetermined price intervals, in contrast to most other strategies, works best in a ranging sideways market with no clear direction. In actual circumstances, your buy order will be executed when market goes down, in the other hand, your sell order, which corresponds to buy order, will be fulfilled when market goes up. So, the more the price volatile at the price range and the more profitability it will be.
You can decide how to set the price range and the other parameters as your plan, however, the price range is divided into multiple levels by grid quantity. Also, the efficiency of execution and the earning mode of Grid Trading is followed by your requirement.
Use BTC/USDT trading pair for example. Grid Trading bot will purchase some BTC as initial position directly at current price when you create the bot order. Then, the bot will automatically place buy and sell orders according to parameters you set. Assume the price range is 20,000 to 50,000 USDT with 7 grid and arithmetic mode, in other words, the range between each grid will be 5,000 USDT.
Eventually, the Grid Trading bot will operating day and night to satisfied grid mode, and make profits by executing orders dynamically.
Top 5 Benefits of Grid Trading Bots
It is recommended that before actually using Grid Trading bot, you should first understand the benefits and risks of Grid Trading strategy, absolutely, when applied to the cryptocurrency market. By understanding 5 benefits of Grid Trading bot could help you schedule investment plan successfully, as well as better risk management.
- Volatility of Cryptocurrency, Make Profits More Easier.
With any approach, volatility of cryptocurrency, like bitcoin or the others, is higher than traditional assets. In terms of volatility, higher volatility means more price ups and downs, so as the risk and reward. Therefore, crypto-asset can provide more opportunities to profits by using Grid Trading bot, because of the higher probabilities to trigger buy and sell orders.
As you see the volatility comparison below, bitcoin’s annual volatility is outstanding, by saying that, nearly one-third of the annualized volatility is greater than 79%, which is significantly higher than other assets, such as crude oil, gold, US stocks, etc.
- Low barrier to Use
Running profitable Grid Trading bot is not require any algorithms, indicators, or complicated market analysis, but in relation to selecting favorable trading pair, setting price range and parameters.
Of course, risk management of your positions is another important part. Based on historical data from digital asset research, bitcoin price is showing bullish in long-term prospective, even though there exist corrections during 2011, 2014 and 2018.
As result, if you utilized Grid Trading bot correctly, it may increase your portfolio’s value continuously following by the market trend.
- Risk Diversification
Grid Trading bot can be regarded as position management strategy, compared to one-time purchase of spot or contract, it can effectively allocate your capital into separate amount equally. In consequence, the risk of lump-sum investment is being distributed to different price levels, which result in better average purchase price.
For example when BTC/USDT trading at 35,000. Other remain same, If market price plunge to 30,000, you will suffered 14% unrealized loss. In contrast, you may suffered 9.85% unrealized loss when you use Grid Trading bot. Apparently, Grid Trading bot is more defensive when market turn to opposite direction.
By the way, Grid Trading bot can prevent irrational behaviors result from market fluctuations or unexpected events. Most of the unideal performance are cause by those emotional or impulsive investment decisions. Indeed, the Grid Trading bot is always win in strategy execution and risk management.
- Widely Use Cases
Simple mechanism accompany with automated system. Grid Trading bot has great applicability to different investment scenarios, as for arbitrage in short-run period or for profiting in long-term. Even more, you can also use Grid Trading bot for providing liquidity to target market with thin volume.
- Better Risk-Return Trade-off
Investment in cryptocurrency is one way trip. Due to its high volatility, you will fascinated by the return from momentum, by saying that, you may also suffer huge losses from price change dramatically.
Nevertheless, Grid Trading bot is full of advantages in crypto-investment compare to active investor. With no demand of analytic abilities, no need to learn many technical tool, and less time to spend on it. At meantime, Grid Trading has great ability of risk diversification as above mentioned, in overview sight, Grid Trading bot is the one can achieve best risk-return profile in many situations.
Risk about using Grid Trading Bots
- Probability of Large Losses
As you know, Grid Trading strategy has better risk-return profile but every strategy has it constraints. As long as market price not exceed the price range you set, you won’t confront serious risk, only learn to deal with unrealized loss. Unfortunately, if the price range being break, the grid bot will stop to operate new orders and the paper losses continue expand. In this case, there will exist probability of large losses when bearish sustained, besides, place stop-loss order or schedule another grid is the choices you need if you don’t have any exit plan.
- Restricted to Price Range and Parameters
It is essential to construct ideal price range and complete other trading parameters for creating a Grid Trading bot. Not like other strategies based on signal or personal judgement, Grid Trading bot is easy to use and more cost-effective. However, the greatest advantage may become the vital weakness at some time.
Such as you may feel frustrated when market price outpace predetermined price range, no matter price goes up or down.
Remember, price range impact the scalability of making profit, the quantity of grid influences the potential of arbitrage, and the mode of grid is decided whatever your prospective is. Hence, the parameters decide the profitability of Grid Trading bot.
Risk Warning
Grid Trading bot as an automatic trading tool should not be regarded as financial or investment advice from BOXTradEx. Grid Trading bot is used at your discretion and your own risk. BOXTradEx will not be liable to you for any loss that might arise from your use of the feature. It is recommended that users should read and fully understand the Grid Trading tutorial and make risk control and rational trading within your financial ability.
