Grid Trading Strategy

The grid trading strategy is a very powerful exit strategy for cryptocurrency bots, due to crypto’s high volatility. The grid trading strategy allows for multiple buy orders after entering a trade along with a take profit. If the price of the coin drops the grid orders will be hit and the bot will buy more into the position making their position cheaper per coin – allowing them to exit the position sooner.

How does Grid Trading work?

Once the bot enters a trade the bot will place a spot limit-sell order as the take profit, if the coin rises in price and hits the spot limit sell order then it exits the trade in profit. However, if the price of the coin fluctuates downwards it will market-buy more each time the price action meets the user’s preset grid orders. Each time the grid levels are hit the bot will move the take profit lower to adjust for the new average per coin price.

Setting up the Grid Trading Strategy

BravoBot allows the users to choose between linear or geometric when it comes to the spacing between their grid. Linear means that the space between the levels is static (for instance 2%, see example 1.), the gap will always be the same, while geometric means that the gap will grow the further the price action moves from the original entry.

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Next up the user is able to set up the take profit level. This works just like regular take profit which you can find out about here.

After that, the user is asked to enter how many grid levels they wish to place. In order to use the grid trading strategy, your virtual wallet has to be split up into small amounts that will be used per grid order, this is determined at the top by the “fixed buy order size %.” This percentage is used to determine what percentage to use of the virtual wallet per level, that means if your buy order size is 5% then each grid buy will spend 5% of your virtual wallet meaning that you can only have a maximum of 20 grid levels.

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Next, you can adjust the gap between each grid by the percentage in price. Let’s just say you set the difference to 1%, this will place the grid 1% apart.

After that, you can adjust percentage-wise how much more you want the bot to spend per grid level. So for example, if you set the percentage to be 10% then the bot will spend 10% more each time it hits a new grid level. The last option adjusts if you want this increase to be linear or compound.

Example of how Grid Trading Strategy works

For the following example, these settings will be used.

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Diagram How Grid Trading Strategy Works

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Step by step How Grid Trading Strategy Works

  1. Bot enters trade and sets up a grid of 6 orders below entry price 1% apart (1, 3, 5, 7, 9, 10)
  2. Bot sets up the spot limit-sell order at 3% above entry price
  3. Price action reaches the buy order and the order gets fulfilled
  4. Bot removes previous sell order (2.) and moves it down to adjust for the new cost per coin average
  5. Price action reaches the next grid buy order and the order gets fulfilled
  6. Once again the bot removes the previous sell order (4.) and moves it down to adjust for the new cost per coin average
  7. Price action reaches the next grid buy order and the order gets fulfilled
  8. Once again the bot removes the previous sell order (6.) and moves it down to adjust for the new cost per coin average
  9. Due to volatility of the market the price action hits two grid buy orders at once, both of the buy orders get fulfilled
  10. The price action starts reversing so the last grid buy order does not ever meet the price action
  11. The price action meets the take profit line that was placed after step 9 and the bot exists the trade with a 3% take profit.

As you can see thanks to the grid trading strategy the bot was able to exit the trade before the reversal that happened shortly after. If the cost per coin was not decreased by buying more coins with the grid and simple take profit was used at 3% the bot would’ve not existed the trade and would’ve been stuck for a longer period of time.

Grid Trailing Take Profit

As of a recent update, BravoBot Grid Trading Strategy now supports trailing take profit, allowing users to maximize their profits when using the Grid Trading Strategy. The way it works is if the price starts heading downward, the grid will function the same way as previously however after it reaches a set profit, it will remove the grid and start to function like the Delayed Trailing Stop Loss. If you would like to learn more about how Delayed Trailing Stop Loss works, you can get additional information here.

New Options Explained

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The recent update introduced an additional take-profit method.  Which works similarly to the aforementioned Delayed Trailing Stop Loss. The other two options tell the bot on how the Trailing Take Profit should work. In this example you can see that the activation percentage is set to 1%, this means that the bot will only activate the trailing take profit once the overall profit of the position hits 1%, this is when the bot would remove all the grid buys and start the trailing stop strategy. The Second value is 0.5%, this is the distance where the trailing line will be from the 1%, so once the profit of the position has reached 1%, it will create an imaginary sell target 0.5% below it. This 0.5% line will follow the price action rising closely behind it, and once a reversal happens the price action will hit the stop order and exit the position with an increased profit rather than a static 1% take profit. However, there is a chance that if the price action reverses right away after reaching 1% the bot will sell its position at a 0.5% profit, still securing some profit.


Revision #2
Created 16 November 2022 10:32:53 by BravoBot
Updated 16 November 2022 11:03:37 by BravoBot