Grid trading is one of the ways to engage the crypto market, and make profit off it.
The crypto market is replete with many ways to make money and maximize profitability, and grid trading is definitely one of them.
In this piece, you’d learn all you need to know about grid trading, and how to make money off it in the crypto market, whether you are a beginner, or a pro trader.
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What is Grid Trading in Crypto?
Grid trading is a very simple trading strategy that involves picking a short price range around a coin, and then setting both buy and sell limit orders above and below the market price, to trigger buying and selling at designated price points, ultimately amounting to profit.
For example, let’s say Ethereum is at a market price of $2500, you can then place multiple buy limit orders around $2350, $2400, and $2450, and then place sell limit orders at $2550, $2600, and $2700.
By the time your sell orders are triggered, you’d take profit in USDT, or any other currency you are trading. Grid trading allows you to capitalise on small price changes without the need for technical analysis.
How Does Grid Trading Work?
The core idea of grid trading is to divide price into multiple grid levels.
The two major levels to set price limits for grid trading are:
- Buy limit below the current market price
- Sell limit above the current market price
Anytime price touches any of the limits you have set, a market order is triggered. You must have heard of this common phrase, “buy low, sell high”. That is the idea behind grid trading.
So price limits are triggered below the current market price, which translates to buying low, and then when the price moves higher, the sell limit is triggered, which translates to selling high.
You can set both buy and sell limit orders manually, or use a bot. Crypto Exchanges like Bybit, Binance, KuCoin, and many others have grid bots you can use.
Types of Grid Trading in Crypto
There are different kinds of grid trading that can be explored to scoop profit off the market.
1. Neutral Grid
This type of grid trading strategy involves a ranging market. In a ranging market, price moves in an oscillatory manner, thereby creating lots of opportunities to quickly capitalize on market movements to sell or buy.
For example, if you check the chart of Bitcoin, and you notice that price has been oscillating around a certain price point for some days, you can set buy orders around support levels on the chart, and sell orders around resistance levels on the chart to capitalize on the range.
2. Long Grid (Trending Bullish)
In this type of grid trading, the market is on an upward trajectory, and the way to capitalize on the move, is to place buy orders around spots of retracement on the chart.
Market doesn’t move in one straight file either to the upside or to the downside, there are always slight pullbacks for every move on the chart. These pullbacks are zones for accumulating buy orders.
In bullish markets, profit targets can be significantly higher compared to ranging markets.
3. Short Grid (Bearish Trend)
In this type of grid trading, the market is on a downward trajectory, and so there are a lot of opportunities to place buy orders around zones far below the current market price.
The idea with a short grid is to capitalize on short bullish moves.
In a bearish market however, price may take a while before making major bullish moves to trigger sell orders at distant zones.
4. Automated Grid
This type of grid trading involves the use of automation tools like bots and AI to predict market moves and capitalize on market volatility.
Exchanges like Binance, Bybit, KuCoin and many others have bots that users can use to explore grid trading and scoop profit off the market.
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Benefits and Risks of Grid Trading in Crypto
Benefits
- Grid trading, especially spot grid, help traders to manage risk. When price moves away from your entry point on spot, you only have a percentage decrease for some time until price recovers, unlike futures grid where you can get liquidated.
- Grid trading also helps the trader to not fall into emotional trading. Once the price limits are set, the system executes it as long as it is not altered or deleted.
- It gives traders a good opportunity to profit from small market moves, and compound profits over time.
- You do not need to do a total analysis of the market. You profit on market volatility itself.
- It works well during times of high market volatility.
Risks
- If price does not tap into your grid zone, you may have to wait for a while to break even, or sell in profit, especially when price taps your buy zone, and lingers to touch your sell zone.
- Depending on the amount of capital you deploy to grid trading, trading fees may eat deep into your profits.
- Your account can get wiped out under future grid if proper risk management is not implemented.
- In a downtrend market, you may end up holding more and more assets at lower prices for a long time before price reverses.
- If you select a wrong grid range span, price may slip out of that zone, and may not come back on time.
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Frequently Asked Questions About Grid Trading in Crypto
What is Grid Trading in Crypto?
Grid trading is a type of trading that involves setting buy and sell limit orders above and below the current market price of an asset, in the bid to make profit off small price movements and changes in the asset.
Can Grid Trading Work in a Bull or Bear Market?
It can, but grid trading works best in a ranging market. In a ranging market, price is more likely to tap your buy and sell zones more frequently.
What are the Main Risks of Grid Trading?
Main risks of grid trading involve possible liquidation on futures grid, fees charged by crypto platforms, and price breakouts from your grid zones.
What are the Best Coins and Pairs for Grid Trading?
The best pairs for grid trading are pairs with high liquidity like Bitcoin, Ethereum, and many others with high market capitalization and trading volume.
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Conclusion on Grid Trading in Crypto
Grid trading is a sure way to compound profit in the crypto market, but it is not an holy grail.
There are possibilities of losing with grid trading, especially with futures grid. The best type to preserve your capital, and maximize profitability is spot grid.
Explore the different types of grid trading and pick the one that works best for you.
After making profit, you need a good crypto to cash platform. This is where Breet comes in. Cash out your crypto in 287 seconds or less on Breet!, and enjoy rewards for trading.
