What are GRID trading bots?
The name of the system comes from the shape formed on the price chart when the bot places orders. Market positions are accompanied by “take profit” and “stop loss” orders that are placed, obviously, above and below the entry point. A series of such market positions create a net on the chart. This is the grid that gives the bot its name.
The main strategy employed by this bot is DCA buying. DCA stands for “Distributed Cost Average” and refers to a method first described by Benjamin Graham in 1949. The method suggests purchasing smaller portions of assets across multiple market positions separated by set periods such as weeks, months, or years.
In theory, this approach allows investors to reduce the average cost of investment. The idea inspired a contemporary version of the strategy where investors make a series of purchases alongside a downtrend to reduce the average price while trying to exit the market at the highest point within a certain time frame.
GRID trading strategies are DCA on steroids. These bots place a series of buy orders with individual “take profits” and protect them with strategically placed “stop loss” orders aimed at reducing the overall risk level. The strategy is quite popular among experienced retail traders working in the crypto domain.
How to use a classic GRID trading bot?
A preset GRID bot will have default settings that work for most cases and can produce good results. However, you can adjust them according to your preferences and requirements. For example, people with higher risk tolerance and bulkier portfolios may want to be more aggressive with “stop losses” and place them lower to give all market positions a chance of recovering even if the downtrend continues.
The classic version of the system is offered by many automation vendors with many companies having unique products that have some adjustments here and there. Whether you should choose a certain company over another is a completely different issue. We believe that customization is quite important and you must be able to change every aspect of your GRID bot if you want to.
Which is the best crypto for a GRID bot?
The GRID strategy requires targeted digital assets to have some properties that are non-negotiable. They will not work without high liquidity and a high enough number of market participants.
- High liquidity is necessary because bots must be able to not only enter the market but exit without any delays and issues with selling off assets. If you work with digital assets that experience liquidity shortages, you will encounter situations where you cannot liquidate a market position in time to make a profit.
- Without many market participants, some orders will be left without a counteroffer. This issue is similar to the liquidity problem but may occur in some cryptocurrency pairs that seemingly have high trading volumes, but do not have sufficient traders to finalize all deals instantly.
Examples of such crypto coins are all mainstream tokens like Bitcoin, Ethereum, Ripple, Cardano, and many others. Note that obscure coins may have similar properties and can be used to run GRID bots efficiently. However, the performance also depends on a variety of other factors including the type of exchange you work on.
How to pick a good exchange?
GRID bots will work especially well on centralized crypto exchanges that have powerful APIs and servers capable of maintaining many simultaneous connections without any issues. Many contemporary CEX platforms satisfy the technological demands of automation vendors.
You should also look for other properties in exchanges:
- A large list of supported coins. You may want to run GRID bots on several crypto pairs at the same time. Some strategies focus on concurrent trading of digital assets sharing price action properties (cointegration).
- Sufficient liquidity. Some exchanges have higher liquidity than others and may be able to fulfill their obligation to instantly execute orders. Choose companies that never experience any liquidity issues. Read forums and user reviews.
- A large number of users. Companies like Binance, KuCoin, and OKX usually receive the most media coverage and attention for a reason. These platforms have millions of daily users. It also means that you will always have a counter-offer to instantly exit any market position which is a necessary condition for GRID trading.
You may be interested in running trading bots on ByBit, Kraken, Poloniex, and many other CEX platforms that proved their reliability and trustworthiness. Just make sure that an exchange you like has a functional API and can be integrated with a variety of third-party services.
Working with a good exchange is quite important. On the other hand, it is even more important to choose a good provider of automation services. If you run a crypto GRID trading bot on a platform that does not have 99.9999% uptime and reliable servers, your robots may never perform as intended.
How to pick the right automation vendor
A good automation provider will have several crucial qualities that allow it to deliver excellent service and offer a wide range of products.
- Reliable technology. All online-only services use cloud computing platforms to deliver their products. However, some clouds are better than others. Work with companies that can guarantee the coveted 99.9999% uptime.
- Diverse product lineups. Automation is a great way to diversify your investments. Simultaneously, an automation platform can be used to further diversify the portion of your portfolio dedicated to it. You may run your spot GRID trading bots alongside DCA, arbitrage, and custom bots as well as copy trading!
- Advanced customization is crucial. You can use the best GRID bot settings which are settings that work with your strategy deployed on TradingView or any other analytical platform that can be integrated with automation services. Companies that do not allow their clients to tinker with preset solutions severely limit your potential to make profits with bots!
- User-friendly interface. While you can figure out how to use a dashboard that can confuse a space pilot, it will hinder your ability to deploy efficient trading robots quickly. Work with platforms that have organized dashboards and intuitive navigation.
- Educational materials. Creating custom bots or running an adjusted preset solution can be quite hard for newcomers without any prior exposure to financial markets. A good provider of automation services will have detailed tutorials, video lessons, and more to help its clients sort out the functionality of the platform.
Companies like WunderTrading tick all the boxes and deliver a satisfactory user experience. You can also try the platform for free and use the free plan (automatically available to all registered users) indefinitely. WunderTrading offers a rich selection of preset bots like DCA, GRID, and arbitrage bots alongside a unique marketplace for copy trading.
When should you run GRID bots?
This system is considered a safe ATS that can work as a secondary income stream if you manage risks properly. However, gains from GRID bots limited by strict “stop loss” scenarios will be comparatively low but consistent. This stability is the reason why you should use these bots to offset risks associated with other investment endeavors.
People who are interested in GRID, DCA, and arbitrage often have experience with automation and attempt to automate promising technical analysis strategies highly praised by the community. It means that they understand the purpose of hedging and how to employ relatively safe methods like DCA and GRID to protect their portfolios.
A good idea to deploy multiple safer systems like GRID and arbitrage alongside any other investment endeavors. These bots will generate profits consistently and make sure that you have the income to offset losses that you may suffer by engaging in other trading activities.
How to set up a GRID bot in 2023
You will need to do three things to start using a GRID bot:
- Signal generators. Analytical platforms like TradingView can be used to deploy sophisticated strategies that identify optimal moments to enter the market. You can find a variety of time-tested and newly created strategies designed by power users of the TradingView platform and review by the community. These strategies will tell bots when to start placing orders.
- An automation platform. WunderTrading is an excellent choice. You can create unique custom bots or choose presets. The service is fully integrated with TradingView and a multitude of crypto exchanges including Binance, KuCoin, Coinbase, and many others. It is a great automation vendor that has a rich product lineup and strong backend architecture.
- An exchange where you will trade. Choose your exchange wisely and follow the tips described previously. If you plan to use WunderTrading and TradingView, select crypto exchanges that are integrated with these platforms.
The process of launching a bot is quite straightforward:
- Go to the WunderTrading official website and create an account if you don’t have one.
- Go to TradingView and create an account if you don’t have one. Upgrade your plan to run advanced strategies.
- Go to your exchange and top up your balance. Copy the API key to connect it to WunderTrading.
- After connecting an exchange to the automation platform, go to “My Bots”.
- Select “New Bot” and choose what kind of bot you want to launch.
- Adjust settings according to your preferences and add sources of signals.
- Launch the bot. It will be working automatically without additional inputs.
Note that you need to fine-tune all bots so that they operate within certain limitations defined by your risk tolerance and portfolio size. Do not expect to simply launch a preset product and make money without any effort.
Are GRID bots profitable?
If you have a good technical analysis strategy that can predict upcoming downtrends, your GRID bots will make money consistently. The profitability depends on the settings. If you want to be aggressive, you can lower “stop loss” orders and raise “take profits”. We do not recommend removing these commands.
You should not expect crazy gains from running GRID bots. The system is designed to bring in relatively small profits with an impressive level of consistency. You can further optimize bots by tinkering with settings and deploying multiple copies working with different digital assets. However, you won’t be able to outpace experienced human traders.
Have reasonable expectations and you will be rewarded with a stable stream of income. One of the ways to increase income is to deploy hundreds of bots that all generate small profits across multiple exchanges and currency pairs. This approach will require you to upgrade your WunderTrading plan and dedicate time and effort to find an excellent strategy for TradingView, but you will make bigger profits.
Nobody can guarantee you profitability or exact revenues from running GRID bots or any other trading system. Results vary from one retail trader to another. However, you can achieve consistency!
The main takeaway
GRID bots are a good investment for contemporary retail traders. GRID bots continue gaining popularity. They will be a staple for many crypto enthusiasts in 2023 alongside DCA and arbitrage bots. Whether you like the idea of automating your investment endeavours or not, you will have to use bots to keep up with the market.
The best GRID trading bot strategy is to embrace automation and use it wisely to offset risks associated with manual trading, aggressive scalping, or copy trading.