Bots
Grid Trading Bots Tips and Tricks
Beginner
2023-10-23 | 5m
Slide 1. Opening remarks:
We all know that grid trading is a quantitative trading strategy for volatile markets, but different people can achieve a wide range of returns in the same market. So today, let's discuss how we can achieve higher returns with grid trading bots.
I'll be sharing some experience and tips on grid trading to help you achieve your goals.
Slide 2. What are the basic logic of grid trading?
First, we need to know how grid trading bots make money, right? The basic logic is:
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Take advantage of the spread by buying high and selling low;
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Achieve higher returns through frequent arbitrage.
Slide 3. What are the 3 parameters that are related to profits
Buying and selling is the essence of arbitrage. Therefore, what we need to do next is boost our arbitrage trading frequency. There are three parameters that are related to profits:
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The trading period;
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The grid price range and its upper and lower limits;
3.The number of grids.
Slide 4. How can you find the most suitable trading period?
The pivotal point is to predict the right trends and identify a suitable price range in the long-term. Then, you need to identify what the most suitable trading period is for you after clarifying the basic logic. You can make arbitrage trades on a daily basis, a 4-hour basis, or other time periods.
How can you know what's an appropriate trading period?
If you haven't checked the market conditions for 24 hours, then you could say you are a mid-term or long-term trader. In contrast, if you have to follow the market every hour or even more frequently, then you can be defined as a high-frequency trader. In conclusion, the most suitable trading period is directly related to your appetite for tracking the market.
If you are viewing daily trading charts right now but intend to make more profits, that doesn't mean you have to switch to monthly trading charts. In reality, the next level above daily trading charts is weekly trading charts. Similarly, the level below daily trading charts is 4-hour trading charts, and then 1-hour trading charts. As you can see, you can choose your preferred option based on your needs.
Slide 5. How should I set a grid price range and its upper and lower limits?
The core parameter of grid trading is its upper and lower limits, which can directly affect your final profits. We would like to introduce some indicators and tips to respond to different market conditions.
It is my understanding that there are three indicators that are important for you to know, could you share with us please?
The first one is ATR (Average True Range). It can be found on some popular market trending software like TradingView. ATR is the average true range of the corresponding trading period (weekly trading/daily trading/4-hour trading). The specific formula is as follows:
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Upper limit = market price + ATR over a long period
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Lower limit = market price - ATR over a long period
You can find the ATR indicator in the candlestick chart section on Bitget's trading page as follows:
Please bear my mind that the example and calculations we are showing are based off of the graphs we have on the powerpoint, so if you are viewing on your computer you can blow it up full screen so you can follow along.
Oscar, could you show us an Example please?:
If you are trading BTC/USDT based on a 4-hour trading chart with a BTC price of 30,000 USDT, and an ATR of 900 USDT on Bitget's daily trading chart, then the upper limit and lower limit are as follows:
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Upper limit = 30,000 USDT + 900 USDT = 30,900 USDT
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Lower limit = 30,000 USDT - 900 USDT = 29,100 USDT
That's why we say, you should predict the right trends and identify a suitable price range in the long-term.
The second indicator is the trend line, which follows a similar logic.
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Identify the upper limit in the descending trend line over a long period;
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Identify the lower limit in the ascending trend line over a long period.
What is the trend line? The ascending trend line is a line that connects many higher lows and has a positive slope, which indicates a bullish pattern. Similarly, the descending trend line is a line that connects many lower highs and has a negative slope, which indicates a bearish pattern. Note that the more highs or lows the line has, the more precise it is.
Please show us an example:
If you are trading BTC/USDT based on a 4-hour trading chart with a BTC price of 26,409 USDT, after you draw the ascending trend line and descending trend line on Bitget's daily trading chart, you will see that the intersection for the former is 28,097 USDT and the intersection for the latter is 25,353 USDT (values can be vague here). Based on this, the upper limit and lower limit are as follows:
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Upper limit = 28,097 USDT
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Lower limit = 25,353 USDT
The third indicator is the support and resistance levels. This is also a popular indicator to:
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Identify the upper limit in the resistance over a long period;
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Identify the lower limit in the support over a long period.
So Oscar, what are support and resistance levels? The support level is a line that connects many lows in a volatile market, while the resistance level is a line that connects many highs. Note that the more highs or lows the line has, the more precise it is.
Example:
If you are trading BTC/USDT based on a 4-hour trading chart with a BTC price of 26,504 USDT, after you draw four lines containing the support and resistance levels on Bitget's daily trading chart, you will be able to see two sets of values:
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If you are aggressive:
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Upper limit = 28,707 USDT (line 2)
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Lower limit = 25,435 USDT (line 3)
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If you are secure:
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Upper limit = 31,151 USDT (line 1)
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Lower limit = 21,599 USDT (line 4)
⚠️ Note that the lines here only show you the basic logic. Different users may end up with different lines based on a different criteria.
Slide 12. Conclusion:
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Short-term: ATR is more suitable since it is more flexible, closely related to the market price, and variable in value.
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Mid-term to long-term: The trend line or support and resistance levels are more suitable since they are more stable and take historical market data into account.
Slide 13. How can we set the number of grids?
The number of grids used can affect your trading frequency. Using too many grids can result in an undesirably high trading frequency, while using too few grids may cause orders to remain unfilled for long periods of time. The higher the trading frequency, the more trades. Hence the profit for each grid will be reduced and transaction fees will increase. As such, it is crucial to adjust the number of grids to make more profits. We can use ATR, (Average True Range), to determine the number of grids.
When the ATR is greater than the grid price difference, there may be more trades, and grid profits may be boosted. That is, ATR > grid price difference = (upper limit - lower limit) ÷ number of grids. Therefore, we can use the formula, (upper limit - lower limit) ÷ ATR, to get a rough number of grids.( You can see as followed, the formula is here)
Example:
You are trading BTC/USDT with the BTC price of 26,000 USDT. The grid's upper price is 31,000 USDT, the lower price is 22,000 USDT, and ATR = 600 USDT.
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The recommended number of grids > (31,000 USDT - 22,000 USDT) ÷ 600 USDT = 15
By taking into account the above calculation and a recommended single grid profit ratio (after deducting the transaction fee) of around 0.5%, you can enter specific parameters on the Bitget bot creation page and get a single grid profit ratio from the system. Based on this, you can set a more reasonable number of grids. (Orders will be made only when the profit for a single grid is greater than the transaction fee.)
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6. Other comments and suggestions
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Some users are afraid to use leverage, which also applies to futures grid. As far as I am concerned, a suitable leverage can help boost your profits if you have already learned about a trading pair and employ a relevant trading strategy.
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BTC and ETH are two preferred assets for grid trading as they generally perform better in a volatile market over the long term. In addition, they are dynamic, with a high trading frequency and liquidity. Why not have a go and save yourself from the stress and worry of liquidation.
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We recommend finding the best grid start time. Ideally, try waiting until the asset's value hits the bottom or a bear market emerges. Under such conditions, you won't suffer significant losses even if the price falls, but can make strong profits when the price rises.
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What if the price falls below the grid price range? Don't worry, you can simply:
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Create another grid if you still have funds on hand;
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Increase the auto-invest rate of long-term bots.
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AI bots can greatly simplify the use of advanced strategies for general users.
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7. Advantages of Bitget AI bots
(1) One-click, hassle-free configuration
The difficulty of manipulating complex parameter settings to run professional, advanced trading bots is daunting for many users. To simplify the use of professional and sophisticated trading bots for general users, Bitget's AI bots provide a variety of intelligent parameter sets for users to choose from, so they no longer need to worry about entering all of the necessary parameters by themselves. The user simply has to select their preferred AI bots, and then select Create Order to proceed.
(2) More reliable bots based on historical market data
Compared with recommendations generated by traditional systems, the parameters recommended by AI bots are calculated based on a market's history and price volatility with Bitget's backend algorithm, a trustworthy and reliable reference for traders.
(3) Catering to different investment preferences
Bitget offers three different types of AI bots for different investor portfolios and risk appetites: Conservative, Secure, and Aggressive. The parameters recommended aim to closely match the user's risk appetite.
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The conservative AI bot places fewer buy orders with a wider spread between orders. It takes a more cautious approach, and is suitable for hedging against extreme market conditions.
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The aggressive AI bot places more buy orders with a smaller spread between buy orders, aiming to trade frequently to pocket more profits from more transactions. The profit from one transaction might be smaller, but will gradually pile up in the long run.
The secure AI bot falls between the conservative and aggressive bots in terms of risk appetite, aggressiveness, and performance.
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