In this article, you will find the detailed introduction into grid trading strategy, best market conditions, and how the Bitsgap trading bot can take advantage over the price fluctuation.


Grid Trading Strategy


Trading bitcoin and other cryptocurrencies with automated solution become very popular because it guarantees 24/7 trading activity. It allows traders to manage their risks without emotions and follow a predefined trading pattern.


Nevertheless, it is essential to know that the grid trading strategy does not guarantee a stable income in all market conditions. If you want to successfully utilize the grid crypto trading strategy, you must understand the fundamentals of trading and current market phase.



General concept


Grid trading is a type of strategy generating earnings from the market movements in a specific price range. It loses its power in a strong trading market when the pump or dump happens. The grid trading technique explores to benefit on natural price volatility in markets by opening buy and sell orders regularly at fixed intervals above and below a market price.


The advantage of grid trading is that it requires little forecasting of market direction. In addition, it is easy to automate this strategy and run it continuously. The biggest drawback is the sudden price drop if stop-loss orders have not adhered. However, grid trading offers one of the easiest and time-tested trading approach if the parameters set correctly. In the long run, it can provide substantial results.


  Note   Grid is using the hedging method by opening both long and short positions. The general idea is that with continuously buy and sell orders, every negative deal can be covered by the profitable ones. 


Market conditions


To understand the advantages and drawbacks of the Grid trading method, we are going to look at two typical market conditions. First when the market is in a strong trading phase, and the other when we can see an established range.


  Note   There is no 100% confirmation of the current market condition because it can be different from the individual perspective. For instance, the market condition on 5-minute timeframe on a 1-hour chart can be different from the price movement on the 1-day timeframe for the past month. 


Good: Ranging Market 

The best results from the grid trading can be achieved in a swinging or consolidating market where price continues to fluctuate in a specific price range.



Bad: Trending Market 

This example perfectly illustrates when the grid trading strategy stops working. This method loses its strength if the price starts to decline. If the downtrend continues with few pullbacks, the combined losses from all open positions will grow exponentially higher.


  Tip    Setting wide stop loss or in-time executed exit strategy will prevent your account from uncontrolled losses.



Bitsgap Trading Bot


The Bitsgap trading bot will help you to automate and execute your grid trading strategy. The bot will continue placing and filling orders, so you can benefit from sideways and volatile market.


In this part, we will explore in details of how the Bitsgap trading bot actually works. In our example, we use BTC / USD pair and the following bot settings:

  • Price range: $6,250 - $8,000
  • Quantity of grids: 8
  • Amount per grid: 1 BTC


  Attention   Do not copy these setting for your bot as they serve for illustration to demonstrate the work of grid trading system. How to create a new Trading Bot? article will help you to set up your first grid trading bot on Bitsgap.


1. Bot is created


Once a trading bot is created, it will distribute buy and sell orders according to grid settings. The buy orders will be placed below the current market price, while the sell orders will be placed above the current market price. If needed, bot will automatically buy or sell currency to create grid.



2. Price moves up


When the price moves up at $7,250 the first sell order is executed. The bot will place a new buy order one grid below at $7,000.



3. Price moves down


When the price moves down at $6,750 the bot executed both orders at $7,000 and $6,750. During that price drop, bot placed new sell orders at $7,250 and $7,000 after each executed buy order.



4. The result


This trading method will generate profit from each trade regardless of the side, buy or sell. It works as long as the market movement stays in the predefined range. The Bitsgap trading bot will automate this strategy for you and provide accurate reporting on your profit results.


You can find more information about Bitsgap trading bot in our Knowledge Base section - Trading Bot.