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The Grid trading strategy is a technique to take advantage of market movement by positioning buy and sell orders at different levels, above and below a set price. You can create your grid to take advantage from trends or ranges and even automate it. Bitsgap SBot and Classical bot are the two most well-known trading bots with their own set of advantages.
What makes Grid bots popular?
The Grid system has become quite popular among traders as it is possible to visualize the results. The best thing about this approach is that it can offer opportunities even in volatile market conditions. There’s no need to worry about the market direction. Once the trader knows that the market is going to make its next move, the strategy will take care of the rest. This is especially applicable to cryptocurrency trading, where volatility is common.
Once the user sets up a grid, he/she can automate it to place buy and sell orders without having to open and close positions manually. It may take some trial and error before the trader can develop a proper approach. Some providers leverage Artificial Intelligence to improve their strategy.
Users must have an understanding of market fractals, fundamentals, dynamics, and broker’s commissions. The grid trading bot needs to be set up accordingly to improve performance.
Configuring a Grid trading bot
The Bitsgap trading bot is a great ally in a fluctuating market. But before you let the system run on auto-pilot, below are some necessary settings to consider:
· Grid number: It signifies the maximum number of buy and sell orders that you can assign to a grid. For example, if you input 20, you will have 10 buy and 10 sell orders!
· Take-profit: The maximum value at which your grid will sell all positions.
· Stop-loss: The lowest price point where you automatically exit the trade. Once the stop-loss triggers, your positions will be sold at a loss.
· Lower-limit: It is the bottom price limit of the grid, which is often a bit higher than the stop loss. The bot won’t place any buy orders below this limit.
· Upper-limit: It is the top price limit of the grid. The bot won’t place any sell orders above this limit.
When dealing with volatile digital assets, make sure to choose a cryptocurrency with sufficient trading volume to make the process easier.
Using the Classic Bot strategy
When you expect the market to be bullish in a given period, it is the best time to use the Classic bot strategy. It has statistically proven to be better when the prices are going higher. The bot dynamically adjusts the grid based on market movements.
The investment distribution logic involves buying and selling a fixed amount of base currency per order. It maximizes the return from each trade due to an increase in the volume with the rising value. Results are more volatile through it.
Using the SBot Strategy
When the prices are trading sideways and the market direction is unclear, it is best to use the Sbot strategy. This bot can trail up and down based on market fluctuations. The in-built feature simulates a trading algorithm using the past data of an asset to assess the volatility and profitability before risking any capital.
The investment distribution logic of SBot is a step ahead of the classic. It always buys and sells a fixed volume of the quote currency per order. For example, if your investment sum is $50, the bot will buy $50 worth of the asset when the price drops. Similarly, when the price rises, the bot sells $50 worth of the asset. This means you buy more at lower prices and sell lesser at higher prices, regardless of the market conditions. Here, the dollar-cost-averaging method comes into play!
The features of automated Sbot and Classic bots may seem attractive, but it is vital to manage your risks. The market can make explosive moves in either direction, and you must be prepared for any situation. Switching between these grid trading bots is the best strategy to make the most of your capital!