How To Trade Using Grid Trading Strategies? Grid Trading Explained
Grid trading is trading by placing orders above and below a fixed price, which is creating a grid of gradually increasing and decreasing price orders.
The technique is becoming more popular today, among the traders trading Bitcoin, Ethereum, Ripple, and any other altcoins. Because grid trading is more profitable.
But in order to get profits, you have to follow certain strategies.
Grid Trading Strategies
Grid trading is to capitalize on the normal price volatility of a cryptocurrency by placing the buy and selling orders at certain regular intervals as said above. The predefined frequency denotes time as well as value, creating a grid-like formation for a trading day.
Regardless of the movement of the market, this frequency for buying and selling your assets is set at different intervals at different times.
Buy orders are placed above the predefined price and sell orders are set below it. But this strategy may change according to the market condition and traders. This strategy will be useful while using an automatic crypto trading bot.
This helps to minimize any human errors in assessment, and the transactions happen as fast as the clock hits the specific time for buying and selling the desired cryptocurrency.
Advantages For Traders By Using Grid Trading Strategies
There are many advantages for traders to using grid trading strategies. They are:
- The Crypto market is a frequently fluctuating one. But this strategy helps you to get a steady profit on a daily basis.
- You will get profit from the general market direction
- The price of any crypto coin will be consistent through a high or low range value, so you will get benefits from daily price ranges too.
- By placing the buy orders above the predefined price and sell orders below it, you can gain profit from trends.
- By placing the sell orders above the defined price and buy orders below it, you can gain profit from market ranges.
There are disadvantages too. They are given below. Let’s check:
- Like any trading strategy, there is a chance of losing your funds.
- You have to carefully handle the stop-loss limit. Otherwise, it will end up losing your whole money.
That is, you have to use this strategy carefully and vigilantly. Here are some points to be carefully noted while trading using a grid trading strategy.
- Try to use the most stable crypto assets.
- Along with setting the stop-loss limit also set a time frame to decide when to move from grid strategy for a particular asset.
- Initially, don’t invest large amounts. Start with a small amount and increase it gradually once you gain knowledge and experience in using a grid trading strategy.
I hope you all got enough information about grid trading, grid trading strategy, its pros, and cons. Feel free to share your experience on grid trading and set a grid trading strategy on your trading bot with us.