I. What is Grid Trading?
Grid trading is a trading strategy in which users can automatically buy low and sell high in a specific price range through a program. In the volatile digital asset market, the use of grid trading can avoid erroneous trading decisions caused by human factors to a greater extent. Grid trading robots will assist users in strictly implementing the user-set low-buy high-sell transactions Strategy.
II. Application Scenarios
With its core of "buy low and sell high", Grid Trading is considered to be more applicable in a sideways market. Beware that unilateral rise and fall of prices would probably bring certain asset losses to users.
III. How to start grid trading?
- Web: At the Spot Trading interface, click ‘Grid Trading’ to enter the page.
- Set parameters on the right side, and click ‘Continue.’
- The invested digital assets will be automatically transferred to the“Quant” account after the strategy is created. When grid trading stops working, the invested assets plus generated profits will be automatically transferred to the the“exchange”account. However, users are unable to withdrawal those profits during operation.
- The system will buy a certain amount of digital assets in accordance with parameters set by users, and opening corresponding buy &sell orders in each grid.
- The opened order will be executed once a pre-set price point is touched. (Please note: fees will then be charged based on the spot fee rate. For more discounts, please click “HERE” to get point cards.) The sell order will be opened in the nearest grid above upon the completion of the buy order; the buy order will be opened in the nearest grid below. One grid, one order.)
- All base digital assets will be sold and exchanged into quote assets like USDT and HUSD when users manually terminate grid operation or the market price rises above Stop_upper_limit or falls below Stop_lower_limit.
Order Opening Mode
1. Manual: User-defined
Users are allowed to manually set the grid parameters, such as the upper/lower limit, grid number, invested digital assets and so on.
2. Auto: Intelligent Recommendation
The system will set the the most appropriate parameters based on the analysis of historical data, in which users only need to set investment amount.
Please note: Data like backtested 7D annual yield and profit margin per grid generates from backtesting with historical data, which doesn’t represent your future profits.
- The upper limit: The highest price of the grid. No orders will be placed if prices rise above the upper limit. (The upper limit should be higher than the lower limit);
- The lower limit: The lowest price of the grid. No orders will be placed if prices fall under the lower limit. (The lower limit should be lower than the upper limit);
- The grid number: Split your price range into multiple smaller ranges (Grids). An order will be executed when prices move to a price point.
- Investment: The amount of digital assets that users invest in Grid Trading.
- Take-Profit Price: The grid will stop working when prices increase to a certain level. The base assets purchased through Grid Trading will be sold and exchanged into quote assets like USDT an HUSD, which will be transferred to the exchange account. (The stop-profit price should be higher than the upper limit.)
- Stop-Loss Price: The grid will stop working when prices fall to a certain level. The base assets purchased through Grid Trading will be sold and exchanged into quote assets like USDT an HUSD, which will be transferred to the exchange account. (The stop-loss price should be lower than the lower limit.
- Profit margin per grid (%): The profits made in each grid will be calculated on the basis of backtesting after the setting of parameters. (The highest price - the second-highest price - (The highest price + the second-highest price)*fees of spot trading/the second-highest price
- Backtested 7D Annualized Yield: The expected APY based on parameters set by users. Backtested 7-day annualized yield= historical 7D yield/7*365
Take BTC/USDT as an example:
- The upper limit: 21,500 USDT;
- The lower limit: 19,500 USDT;
- The grid number: 11;
- The investment: 10,000 USDT
- The current BTC price : 20,000 USDT
As the figure shows, positions will be opened at current price after the creation of strategy, meanwhile buy & sell orders will be opened in all grids. ( A sell order should be set at a price higher than the current market price, and a buy order should be set at a price lower than the current market price.)
A buy order will be executed when prices slide to 19,700 USDT, and in the meanwhile, a sell order will be opened at a price of 19,900 USDT; If prices regain 19,700 USDT after a pullback, a sell order will be executed when and in the meanwhile a buy order will be opened at a price of 19,500 USDT.
The grid trading will stop working when prices exceed 21,500 USDT or break below 19,500 USDT. We sincerely recommend you set “stop loss”to prevent asset losses caused by unilateral fall in prices.
IV. Risk Reminder and Notes:
- If the price falls below the lowest price in the range, the system will not continue to place the order. When the price returns above the lowest price in the range, the system will continue to place the order. If the user sets a stop-loss price. And when the stop-loss price is triggered, the grid strategy ends.
- If the price exceeds the highest price in the set range, the system will not continue to place the order. When the price falls below the highest price in the range, the system will continue to place the order. If the user sets the take-profit price, and the take-profit price is triggered, the grid strategy ends. However, due to strategic reasons, you will be in a short position in this rising market and miss trading opportunities.
- The capital use efficiency is low. Because the grid strategy will place an order based on the price range and grid quantity set by the user, if the grid quantity user set is extremely low and the price fluctuates between the two points set by the user, the system will not perform automatic Ordered.
During the operation of the grid trading, if the asset encounters unpredictable circumstances such as suspension or delisting, the grid trading will be automatically suspended.
V. How to play in high-level way?
According to the recent feedback from users, some high-level paths are organized for your reference, but please note that the following methods do not constitute any suggestions.
- What digital assets to choose for grid trading?
Major digital assets are the preferred choice. The major digital assets usually have more trading volume and better liquidity, so you will not miss trading opportunities.
Digital assets with higher volatility. Choose an asset with a relatively long-lasting fluctuation in the near future for grid trading.
*If you are a newbies, it is recommended that you choose major assets such as BTC/USDT and ETH/USDT. If you are an experienced user, you can try to find highly volatile digital assets for grid transactions.
- What price range should be set?
In order to maximize the profit of your grid, how to make your “net” catch more fish is the core, so how to determine a reasonable price range becomes more important.
Take day traders as an example, we can determine the price range by using “The upper limits = daily resistance level, the lower limits = daily support level”. This is merely, a relatively simple way to determine the price range.
- How to set the grid density?
Grid density is the size of each grid, and the higher the grid density, the lower the profit per grid, the more frequently you trade, and the higher the commission cost. The lower the grid density, the higher the profit per grid, the lower your transaction frequency, and the lower the fee cost. Therefore, reasonable grid density is also very important.
How to determine a reasonable grid density? The Average True Range of fluctuations can be followed, namely, ATR, which can reflect the price fluctuation Range of digital assets. The ATR can be viewed as shown in the figure below:
When your grid spread (the number of grids in the interval between the highest and lowest) is less than ATR. It means that your grid strategy has a higher transaction probability and a higher return rate. Therefore, we conclude that if the number of grids in the interval between the highest and lowest is greater than ATR, the return rate is higher.
However, it is important to note that the denser the grid, the higher the payoff.
To sum up, when using grid trading, a more reasonable price range can be measured through historical K-line data, and a more reasonable number of grids can be determined by the ratio between the highest and lowest prices of the range and ATR, so as to improve the benefits of grid strategy.