How Does It Work?
What is grid trading?
Grid trading is a system used in the forex system traditionally. The idea behind is that placing orders below and above the current market price, ultimately forming a grid of limit orders around the price. Hence, you open and close a very high amount of trade within a day. Each order is seen as a single trade rather than building up a position and managing it. The trader enters to a position at each grid level and exits from that position on the next grid level.
How does grid trading strategy make money?
As you are trading each grid level, you are making a small profit. Your profit depends on a few factors. How much trading fees you pay as well as how far are your grid orders from each other. It is widely accepted that shorter the distance, higher the frequency of trades thus, more profit. However, it all boils down to how much capital you have and what kind of risk profile you are comfortable trading.
Grid trading essentially is profiting from the volatility rather than taking a major directional trade.
How do we calculate profitability and we set up the grid?
There is one major decision you need to make in grid trading system and a few minor ones. The major one is what price range you want the grid bot to cover.
You can chose to cover 10% of a price range, meaning that if the price is at 10,000$, your grid will start from 10,000$ and go down to 9000$. As a fool proof, you can cover 100% which will guarantee that you have enough capital to trade where ever the price is.
Now, you can choose how far you want orders to be from each other. If your exchange is charging you 0.1% fee per trade, you realize that Limit Buy + Limit sell will cost you 0.2% in fees. So, it would be ideal to set your orders more than 0.2% away from each other at the very least in order to profit from the trades.
Voila! We have a grid!
Conclusion
There are many different ways to configure your settings to accommodate different risk levels. Each of the variables like grid size, grid level, order sizing and bankroll management. The possibilities are endless and it is totally up to you. Make sure to read the documentation here
Watch 24 hour trading action in timelapse HERE