After some time searching for answers to the questions: How to make a profit in the sideway market? I have found a strategy called Grid Trading.
This is a strategy developed in the Forex market.
So what is this strategy in Crypto market? Today I will work with you to learn about this Grid Trading.
- 1 What is Grid Trading?
- 2 How to make profit from Grid Trading in Sideway market
- 3 Mechanism of operation of Grid Trading method
- 4 Some notes when trading coins use Grid Trading method
- 5 Summary
- 6 triumphal
What is Grid Trading?
Grid Trading is a trading strategy based on price movement in a predefined grid pattern.
This strategy is quite popular and probably not too strange for those who have participated in the Forex & Stock market.
In general, Grid Trading technology works based on price fluctuations in the Sideway market.
It will place orders Buy / Sell Orders at certain prices. This price is in the price range that was originally determined.
In the simplest terms, in the Grid Trading strategy, capital will be broken down in each grid interval. Traders will place buy and sell orders at certain grid levels.
Whenever the Buy order is matched, the Sell Order is placed above. And vice versa, whenever the Sell order is matched, the Buy Order is placed at the bottom.
Market prices are only 2-way up and down (Sideway state is also the time the market goes up and down but with small amplitude).
The essence of this method is to "buy at low prices and sell at high prices" to make a profit, even though the market is not very volatile.
How to make profit from Grid Trading in Sideway market
The Grid Trading method requires us to execute Buy / Sell Orders continuously whenever the price change cuts through the predefined grid.
It will take a lot of time and effort for a standing trader 1/24 to wait for prices and place orders. So this method is often used with Bot.
Mechanism of operation of Grid Trading method
From this section on, I will take the Grid Trading Bot to describe an example for you.
To illustrate this mechanism, I will take an example with the BTC / USDT pair. The graph above is the price of BTC cropped from Tradingview.
In BTC / USDT pair:
- BTC: Base Currency
- USDT: Quote Currency
Our goal in applying this method is to increase the amount of USDT (Quote Currency) by buying BTC (Base Currency) at low prices and selling BTC when prices are high.
After choosing the Sideway price range, I set up 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 (established milestones) will be: $ 4,200 $ 4,100 $ 4,000 $ 3,900 $ 3,800 $ 3,700 $ 3,600 $ 3,500 $ 3,400 $ 3,300 $ 3,200 $ 3,100
The bot started being launched at [START] The price now is $ 4,200 USD for 1 BTC.
Where the price goes lower.
- Right now Buy Order  is placed at $ 4,100
- When the price goes down exactly $ 4,100, the Buy Order  is filled. This means that the Bot used your brother's USDT to buy 0.05BTC at $ 4,100 USDT for 1 BTC.
Your total assets increased by 0.05BTC (recently purchased), and decreased by $ 205 (0.05 * 4100) USDT used to buy BTC).
At the same time, Sell Order  is set at $ 4,200 and Buy Order  is set at $ 4,000.
- The price keeps going down, the Buy Order  is filled. This means that the Bot used USDT to buy 0.05BTC at $ 4,000 USDT for 1 BTC.
Total assets increased by 0.05BTC (recently bought) and decreased by $ 200 (0.05 * 4000) USDT used to buy BTC. Also at this time.
Sell Order  is set at $ 4,100 and Buy Order  is set at $ 3,900.
- . . .
Where the price goes higher
XAt the time of marking B as shown in the picture, the price starts going up from the $ 3,800 mark:
- As soon as the price reaches $ 3,800 a Sell Order  is placed.
- As prices rise to $ 3,900, the Sell Order  is filled. That is 0.05BTC sold for $ 3,900 USDT for 1 BTC.
Total assets decreased by 0.05 BTC and increased by $ 195 (0.05 * 3900) due to the recent sale of 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 went up and touched $ 4,000, the Sell Order  was filled.
Your total assets went down by 0.05BTC and increased by $ 200 (4000 * 0.05) due to the recent sale of 0.05BTC for $ 200.
At the same time, Sell Order  is set at $ 4,1000 and Buy Order  is set at $ 3,900.
- . . .
Just like that, when the price continues to move up and down within the set price range (from $ 4,200 ~ $ 3,300) matching buy and sell orders will increase the USDT total assets (Quote Currency).
Explain more clearly about special cases Grid = 2
Okie, maybe some of you are still confused about how the overview of Grid Trading works.
In this section, I will take an example of the most special case in this GridGrid Trading method.
- Trading Pair: OST / BTC
- Number of grid lines (Grid): 2
- High Price (H): 0.00000640
- Low Price (L): 0.00000604
- The time to start applying Grid Trading method at [START].
The total amount participating in the Grid is 1000 OST. At the moment START only BTC, no OST.
- At (1): You use 0.00604 BTC to buy 1000 OST.
- At (2): Brothers sold 1000 OST earned 0.0064BTC => 0.00036 BTC profit.
- At (3): You use 0.00604 BTC to buy 1000 OST
- At (4): Brothers sold 1000 OST earned 0.0064BTC => 0.00036 BTC profit.
- At (5): You use 0.00604 BTC to buy 1000 OST.
- At (6): Brothers sold 1000 OST earned 0.0064BTC => 0.00036 BTC profit.
- At (7): You use 0.00604 BTC to buy 1000 OST
See details in the table below.
So At the end of the order (7), we have 1000 OST and are losing 0.00496 BTC compared to START time. So is it losing money?
If this amount of 1000 OST brothers sell at the current price of 0.00000604 BTC for 1 OST then we have 0.00604 BTC. So the total number of BTC is 0.00604-0.00496 = 0.00108 BTC.
This is our profit as of the time of (7.) With this price movement, profits will increase.
Notice: The above is just an illustrative example to explain the mechanism of operation of Grid Trading. You should find out the pairs yourself and make the right decisions.
Some notes when trading coins use Grid Trading method
Advantages of Grid Trading in trade coins
- Cryptocurrency Market fluctuates with relatively large amplitude (compared to Forex & Stock). Even during Sideway. Therefore, Grid Trading is a very suitable method for Trade coins.
- Grid Trading in trade coin currently has Bot - GridTradingBot to solve the problem of placing orders and matching orders.
Once you have determined the Sideway price range, the rest is for the Bot. Profits earned will be steady without extra effort.
- Minimize the losses that you may encounter. The splitting of capital to participate in each Grid will help minimize the risk of excessive loss when market prices stick SL.
Disadvantages of Grid Trading in trade coins
- Only effective in Sideway market and especially Sideway with short wavelength, wide price range.
This is understandable when you look at the price graph, with a short wavelength. That is, in a shorter time period, the more the price cut through the grid lines and the more orders are matched.
- There are many input parameters that you need to analyze to come up with the best Grid Trading strategy.
Eg: Sideway price range (Range), Flactuation, High / Low Price, Price fluctuations.
Since then, we have made the decision to set Grid parameters, set Stoploss, set profit expectations, etc. For new players, this is not easy.
- Each coin trading pair has a fluctuating price range, different price steps. So it is not possible to set the same parameter for all pairs. Every pair of brothers needs analysis from the start.
After the above article, I hope you understand the basics of Grid Trading method and how it works.
If you have any questions, you can enter the group BitUniverse Vietnam to discuss in exchange.
Hello and see you again in the next article!