Introduction
Grid trading is a popular strategy, which involves a series of buy and sell orders at a predetermined price level, forming a grid pattern on the chart. This strategy can be used to take advantage of market trends, volatility or other factors. Grid transactions can be done manually, but they can also be automated using software called grid transaction robots. Grid trading robot is an automatic investment tool, which uses algorithms to buy and sell assets according to the predetermined grid trading strategy. These robots can be programmed to follow strategies ranging from simple to complex and can be used to invest in a variety of assets, including stocks, cryptocurrencies, and so on. Grid trading robots can provide a convenient and potentially profitable way of trading, but they also have their own risks and considerations. We will discuss the basics of grid trading robots, how they work, and what should be considered before using grid trading robots.
Grid Trading Robot Parameters
Grid trading robots usually have many adjustable parameters that allow users to customize their investment strategies. Here is more information about four common parameters: the upper limit, the lower limit, the number of grids, and the grid increment.
- Upper limit: this parameter determines the maximum price of the order under the grid trading robot. For example, if the upper limit is set to 10% higher than the current market price, the robot will not place a sale order above that price. two。 Lower limit: this parameter determines the lowest order price under the grid trading robot. For example, if the lower limit is set to 10% below the current market price, the robot will not place a buy order below that price.
- Number of grids: this parameter determines the number of buy and sell orders placed by the grid trading robot within the upper and lower limits. For example, if the grid number is set to 10, the robot will place five buy orders below the current market price and five sell orders above the current market price.
- Grid increment: this parameter determines the interval between the buy and sell orders that will be placed by the grid trading robot. For example, if the grid increment is set to $50, the robot will place orders at intervals of $50 above and below the current market price.
Note: when the upper and lower limits are determined in advance, the number of grids and grid increments can be redundant. These parameters can be adjusted according to the investment strategy and risk tolerance of users' preference. It should be noted that different grid trading robots may have different parameters and options, and users should carefully check and understand these parameters and options before setting up the robot.
Why choose Bitcoin?
In recent years, due to increased competition and changes in business models, cryptocurrency exchanges have been offering $0 transaction fees for certain assets, including Bitcoin. This trend benefits trading bots, such as grid trading bots, because they are programmed to make a lot of trades. With a transaction fee of $0, grid trading bots have more flexibility to adjust positions and take advantage of market opportunities, especially in fast-moving markets. In addition, the transaction fee of $0 can improve the risk-return ratio of the grid trading robot, allowing the grid trading robot to trade more actively without incurring a lot of costs, which is very useful in horizontal markets where price fluctuations may be small. It is worth noting that other fees may be charged, and it is important to check the fee table of any exchange before setting up a grid trading robot. The trend of $0 transaction costs may also change over time.
Grid incremental adjustment
In order to evaluate the impact of grid increment parameters on the performance of grid trading robot, the real bitcoin price data under horizontal market conditions will be used to test the robot with different grid increment values to eliminate the impact of price changes.
The grid trading robot has been tested four times with the same initial investment of $1000, with an upper limit of $43900 and a lower limit of $42700, based on available data. In order to select the grid increment value, the change in the price of bitcoin per minute is plotted, because the grid trading robot is designed to capture any price change that is greater than the grid increment. Four tests were conducted with grid increment values of $1, $10, $50 and $100, resulting in 1200, 120,24 and 10 grids, respectively.
In addition, by drawing the relationship between the grid increment and the percentage of price change larger than the grid increment, it is found that there is a logarithmic relationship between the two variables.
The grid trading robot was tested with grid increments of $1, $10, $50 and $100, and its profits were 1.71%, 1.49%, 1.12% and 0.84%, respectively, while the price of bitcoin rose 0.66% over the same period. Taking into account the rising price of bitcoin, robot profits are 1.05%, 0.82%, 0.45% and 0.18%, respectively.
Finally, the following figure shows the relationship between the profit percentage and the number of grids. It can be observed that after 800 grids (the grid increment is $1.50), profitability does not increase with the increase in the number of grids, but less than 200 grids (the grid increment is $6). Profitability decreases significantly as the number of grids increases. The grid is reduced.
explain
According to the above example, if the grid increment is greater than $6, that is, 0.0139% of the bitcoin price at that time, the grid trading robot will not work. Many cryptocurrency exchanges have limits on the number of grids that can be used, and because grid trading robots require a large number of grids, they are likely to exceed these limits, making them invalid strategies.
