How Grid Trading Creates Opportunities for New Traders

The cryptocurrency market does not sleep. It trades 24 hours a day, seven days a week and right through the year, even during the holidays. This means you are constantly presented with opportunities to buy and sell — which is great, of course. 

However, prices can change in an instant. This means that even with your notifications set, by the time you open your exchange apps to put in a buy order, you might have already missed the boat.  You may even start to feel the ‘fear of missing out’ (FOMO) and end up buying the tokens you wanted — only this time, at a premium.  
Don’t panic; there is a solution.  

Grid Trading is a useful function within the Huobi Exchange which allows users to set their buy and sell prices for supported cryptocurrencies. 

Figure 1: Huobi Grid Trading 

Grid Trading works on a grid system that enables users to key in parameters, which are then placed on a grid. You can sit back and relax while the trading bot does the buying and selling automatically. 

This means you’ll be able to profit from your chosen cryptocurrency without constantly monitoring the market, thus allowing you to focus on other important matters. 

Figure 2: Huobi Grid Trading Strategy

How does it work?

  Manual parameters include: 

  1. Lower Limit — the lowest price threshold at which the bot will stop executing orders.
  1. Upper Limit — the highest price threshold at which the bot will stop executing orders. 

    When either of these limits are reached, a notification will be sent to let you know that the bot has stopped executing orders.
  1. Grids — the number of grids. The more grids you have, the lower profit margins you will earn each time they hit.
  1. Arithmetic Strategy — the price spread between each Grid stays the same. 
  1. Geometric Strategy — the ratio between each Grid stays the same. 

For example, you may setup a BTC / USDT Grid Trading bot based on the following parameters: 

  • Lower Limit: $35,000 
  • Upper Limit: $45,000 
  • Grid: 15 
  • Strategy: Arithmetic 
Figure 3: BTC / USDT Bot with Arithmetic Strategy

If the price moves up between each grid, you will get a profit of 1.21% to 1.63%. If the price moves down, the bot will proceed to purchase BTC, allowing you to Dollar Cost Average (DCA) downwards. 

Backend tracking

In your account, you will see a Quant Wallet — this is where you’ll find the profits and losses you’ve made from grid trading. 

Figure 4: BTC / USDT Quant Account 

The order book shows the buy and sell price of each grid. The price next to each Buy or Sell (shown above in green and red) is the price at which the order will be executed. From Figure 4, we can tell there are 20 grids, because there are 10 Buy and 10 Sell orders. 

Calculating profit and loss

You may have noticed the figures under ‘Total Profit’, ‘Unrealized Profit’ and ‘Realized Profit’. 

Total Profits = Unrealized Profit + Realized Profit.

Unrealized Profit = Profit or loss that is still undetermined since the orders have not yet been closed.

Realized Profits = Profit taken following the execution of a Buy and Sell. This profit is safely stored in your wallet. 

With all these functions, you can allow the bot to run continuously while it scalps the market for profits in between grids. This strategy works well in a sideways market as prices tend to oscillate up and down. However, during an upward trend market, this might not be best strategy to deploy. 

Closing the bot

Upon closing the bot, you will be given two options: 

Figure 5: Closing the Grid Trading Bot 

If you select ‘Close and Sell’, your remaining tokens will be converted into USDT and returned to your exchange wallet. 

If you choose the ‘Close Only’ option, it will keep the current tokens and return the profits to your exchange. 

As you can see, Grid Trading allows new users to experience cryptocurrency trading without the need for constant monitoring of the market. It periodically purchases and sells cryptocurrencies, allowing you to make some gains. 

As always, be sure you do your own research before trading. This applies to any investment strategy or method you choose. 

New to Huobi? Register for a Huobi account and receive up to $300 as a ‘Welcome Bonus’ to help you start your investment journey! If you’re an existing user, check out Huobi Earn and start earning interest on your idle cryptocurrencies.