Grid trading is a quantitative trading strategy that involves placing automated buy and sell orders in an attempt to profit from the volatility of cryptocurrencies. Grid trading is a style of algorithmic trading that automates order execution by utilizing grid trading bots.
To create a grid of orders that covers a range of potential market movements, this method entails placing numerous orders at incremental price levels above and below the present market price.
Generally, the trading bot places buy/sell orders between a predetermined price range, constructing an automated trading grid. This automation allows crypto traders to benefit and make profits on even small price fluctuations and avoid emotional decisions thereby increasing profitability potential in both bull and bear markets.
This article explains what grid trading is, how grid trading bots work and their benefits for traders.
What is grid trading?
The price of cryptocurrencies fluctuates; therefore, seasoned cryptocurrency traders rely on crypto market charts to make trading decisions. However, it can be difficult to keep up when cryptocurrency prices swing wildly, resulting in missed opportunities and sometimes market FOMO. For traders trading in multiple crypto assets and on multiple cryptocurrency exchanges, things get complicated, and constant monitoring becomes a difficult task.
This is where the grid trading strategy may be helpful as a quantitative crypto trading method. Grid trading helps in buying and selling cryptocurrencies in a range set by the trader. The strategy is based on the idea that the price of an asset will fluctuate within a certain range, and by placing orders at different points within that range, the trader can capture profits from both the upward and downward movements of the price. This essentially creates an area or a grid where the grid trading bot will work and calculate profitable buy-sell orders.
Related: Cryptocurrency investment: The ultimate indicators for crypto trading
What are grid trading bots, and how do they work?
Grid trading bots are trading algorithms or codes that attempt to make profits from price changes within the predefined grid area. The trader sets up the parameters or limits for the grid trading bot to function within the predefined range and execute orders as per forethought rules. Thus, grid trading bot orders automate crypto trading.
Let’s take a hypothetical Bitcoin/Tether trade example to understand how a grid trading bot works and…
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