Grid trading is one of the most popular crypto trading strategies among people who do not want to manually trade. It is extremely easy to automate, and in the right market conditions it can make nice profits.
Tools & templates for grid trading listed in this article:
- Example of successful grid trading strategy
- Best crypto grid bot platforms
- Best crypto for grid bot
What is grid trading?
Grid trading is a style of short term speculation. A grid trading strategy uses multiple orders to capture price movements within a range of prices.
Yes you got it right, grid trading is basically a “buy low, sell high” with a fancy name.
In grid trading lingo, the grid is a channel created by placing buy and sell orders on the same market. When using a done-for-you grid bot like 3commas, you will need to decide on the grid limits by yourself.
The bot will analyse the volatility on your market, split your account balance into small parts and place your buy and sell orders without your input. Your orders execute automatically, too.
Flat grid vs trending grid
There are two main types of grid trading strategies - flat and trending.
- With a flat grid strategy, you set up your order grid between two price levels. This is the most basic grid trading strategy, all black-box trading bots use it.
- With a trending grid strategy, you use a technical indicator to define the limits of your grid. Trending grid requires the knowledge of technical indicators and how to backtest them.
Flat grid trading on Binance. Source: Coinrule
Is grid trading a good strategy for your goals?
Grid trading is a good strategy if your goals are making profits in terms of fiat, but you do not want to hold cryptocurrency. Let’s say you don’t believe in crypto, but you want to trade it for the dollar profits. In this case, set up a grid on ETHUSD.
- A good grid on ETHUSD will give you stable profits in USD.
- However, if some of your orders fail to hit, you will possibly end up with lower profit than if you simply held.
If you do want to hold crypto, but you still want to try this strategy, you can grid trade a ratio.
- Grid on ETHBTC will give you profits in BTC.
- Same limitation applies - you may end up with less profit than if you held ETH.
A lot of it comes down to tuning your grid strategy to your selected market… Or to trusting a 3commas-style black box grid.
Successful grid strategy example
- A successful trending grid strategy can be buying every touch of lower Bollinger band and selling every touch of the upper Bollinger band.
- A successful flat grid strategy is, after identifying a range, scattering buy orders within a set distance from the support and scattering sell orders within a set distance from the resistance.
Holy marketing batman, but this grid trading sounded like something brand new, right?
Combined rules for grid trading
30M Bbands on an ETHUSD FTX market below, to show that it works - including the limitation mentioned in previous section.
Look at the pink marks. You would get one buy missed between them, when the price action didn’t reach the bottom band.
Your grid bot would buy the next touch and sell that again for profit, it’s just that the next buy would be at a higher price.
If this keeps happening a lot, your grid will be less profitable than HODL.
This is why grid bots usually make use of less strict rules.
Let’s build a simple flat grid without stop loss:
- If price has decreased of at least 1% from (value at the middle of the range)…
- …and if price is still higher than 2600 USD…
- …then buy for 10% of my account balance.
- Or, if price has increased at least 1% from (value at the middle of the range)…
- …and if price is still higher than 3000 USD…
- …then sell previous order.
- Run this 15x.
This flat grid will buy and sell at various places near your respective support and resistance levels, which will get your orders filled more often.
In the exact same way, in a trending grid with Bollinger bands, you could avoid misses by setting your grid trigger not at touching the bands, but within a certain distance.
Just as a note: It is not immediately obvious, but sometimes lower amount of filled orders generates higher total profit over time. It can happen if each position closes with a higher profit, making up for the lower number of trades. Without backtesting you will not know which way will be more profitable.
Entry and exit are not enough for a successful grid trading strategy
The Bollinger band scalp grid on ETHUSD in current market conditions would be profitable without a stop loss.
However, knowing crypto, you should always set up at least a catastrophic stop loss. Far enough not to get triggered all the time, but still preventing really bad losses.
So, a successful grid trading strategy must have three components:
- a sound entry strategy - that’s covered
- defined risk management - meaning stop loss
- money management - meaning position sizing
Entry strategies can be based on indicators or price patterns. Risk management includes setting Stop Losses and Take Profits levels to protect profits and contain losses. Money management determines the size of each trade and the number of trades placed per grid.
This is all down to your risk appetite and preferences.
Best crypto grid bot platforms
A flat trading grid trades within a range of two price levels. This is the simpler type of grid, when it comes to automation. But in 2023 there are grid bots for all levels of complexity.
Here are the options, from the black-box, done-for-you crypto grid bot to the free stuff which requires a little bit of effort.
[paid] Done-for-you blackbox grid bot - 3commas
If you do not want to bother setting up the rules at all, just use 3commas. The only thing it wants you to choose is the range within which to trade. The bot uses machine learning to scatter your orders through the range.
[paid] Customizable, but user-friendly grid bot - Coinrule template
If you want to have better control over the profit size, use the Coinrule platform.
This is a Coinrule template for a flat grid bot that buys and sells at a percentage distance:
[free] Customizable grid bot without nice UI - FTX Quant Zone
Yep, you can run loads of things on the FTX quant zone, and a flat grid bot is one of them. The only drawback is that you need to type a few lines of text into a box instead of shuffling a few boxes in a cute user interface.
FTX template (Quant Zone Grid Bot)
In FTX quant zone, you can set a single-direction rule to trigger an order. That means a grid bot on FTX will need two rules - the buy side and the sell side. The quant zone has moving averages and volume if you want to refine your rules with some technical analysis, but it accepts plain price level numbers too.
FTX quant zone template example for a grid bot’s buy side could look like the following: If ETHUSD is over 2600, and currently at least 1% below the 4H exponential moving average, place a limit buy at last price with 5% of my available balance.
If you don’t like working with a moving averge, you can make a true flat grid by just naming a price level. Just replace the EWMA in the trigger rules:
(price("ETH/USD") > 2600) and (price("ETH/USD") < 0.99*(ewma_price("ETH/USD", 240)))
Another Quant Zone rule will be needed for your sell side. The trigger could look like this:
(price("ETH/USD") < 3000) and (price("ETH/USD") > 1.01*(ewma_price("ETH/USD", 240)))
For both sides you, will need to set the actual order.
To test if this works, tick the “Post only” box there. If you make a “Post only” order on FTX, the system will place it but nobody will be allowed to take it. You’ll be able to troubleshoot your strategy without risking money.
Here is the full recipe for the buy side of an FTX grid.
[no added cost?] Any level of trigger rule complexity - TradingView (& Coinrule)
This requires either coding skills or Coinrule subscription. As for coding, I mean actual programming, not just copypasting a rule trigger. But if you can do that, you can run a grid bot of any complexity at no additional cost.
You need to have a paid TradingView plan for this, so the total cost is not 0. But since most crypto traders have TradingView, there is no additional expense.
The way this grid automation works is via TradingView alerts. Every alert you set up lets you send a message to a webhook URL:
To trade on that message, you need to have that webhook configured somewhere. This is where you need either coding skills, or Coinrule PRO.
Coinrule platform has a built-in TradingView webhook listener in a paid plan.
Finer points that might interest you
Grid trading market fit
Grid trading can be used in both forex and cryptocurrency markets, although with varying rates of success.
For grid trading in crypto, you need a market that is capable of forming of ranges. That’s not a given in crypto, especially not in small-cap alt coins. Alts that trade based off social media pumps are not usually good markets for grid trading either.
Best crypto for grid bot
Best cryptocurrency markets for grid trading are
- Big markets and dino alts like BTCUSD, ETHUSD
- Popular ratios like SOLBTC, ETHBTC
Worst coins for grid trading are meme coins and any crypto that is undergoing huge fundamental changes. Those can be listing on large exchanges, social media hype or blockchain upgrades.
Grid trading vs shadow system
Grid trading is very similar to shadow system strategy known from forex. (There is a Strategy post on the Shadow System grid if you’re curious.)
The difference is that grid trading strategy doesn’t force closing orders daily. Also, even a flat grid may use technical or quantitative analysis to program your entries and exits. Shadow system uses pre-set take profit levels that work out to an overall profit after a few weeks.
So, grid trading is not a plain numbers game like the shadow system. It does use some discretionary trading methods and it does in part rely on the trader’s good judgement, not on average values over a long time.
Depending on your skill in terms of entries, exits and stops, a good grid has the potential to outperform the shadow system. That’s especially true in trending crypto markets.
Grid bots can run on TA or AI
Grid bot does not have to use technical analysis to place your bids and asks. You can use any data to program your grid bot. Quants could probably come up with a bunch and 3commas uses an AI machine learning algo.
So, if you don’t have the experience to crank out a profitable custom strategy, then it is best to stick to some ready-made grid bot system.
- If you prefer to use technical analysis, scalping Bollinger bands is always a fair game. Easy to set up in Coinrule.
- Otherwise, 3commas is a black box grid setup. You don’t know how the AI decides, but it does have a built in risk management which is the key point here.
In general, cryptocurrencies offer a number of advantages for grid trading. They are 24-hour markets, which allows for more opportunities to trade. Volatility provides opportunities to take advantage of price differences. Cryptocurrencies also have a lower spread than forex markets, which allows for better profits.
There is plenty of tools for grid trading in crypto, and if you don’t need to have everything done for you, they can be pretty low cost as well. Always do your research and set your stop loss though; honeybadger doesn’t care.