5 Reasons why you should use a Grid Trading bot
Grid trading is a trading strategy that involves placing orders above and below a se t price using a “price grid” of orders. The price grid consists of orders at incrementally increasing and decreasing prices.The basic premise of this strategy is to repeatedly buy at the pre-specified price, and then sell the position when the price rises above that level. Conversely, you can sell at a predetermined price point and wait for the price to fall to a set level and buy — repeatedly.
Crypto trading can be taxing and time intensive. However, when set up correctly, bots can take away some of the extra work that you would otherwise have to do manually. Here are 5 reasons why you should use a grid trading bot.
1. Profit during a quiet market
Grid trading bots have the unique advantage of turning a profit in time of consolidating and choppy markets, where there tends to be a lot of indecision and confusion. Every now and then markets trade within a range, though they might still move wildly within that range. Rather than have your crypto assets hibernate along with the market, you can use grid trading strategies to capitalize on a market where you may not have much conviction.
You have the liberty of configuring the bot and selecting prices ranges and the number of grids, which helps you define the frequency and period. You can tweak the bot for the short term, where it makes small profits by trading frequently in a short interval. Or you can set it up to run for longer periods with less frequency, and earn profit from more signific ant price shifts. The underlying strategy is based on the idea of buying low and selling high. With knowledge of the market bots can be customized to suit specific market conditions.
3. Remove emotions from trading
Naturally, traders are prone to emotions, which can lead to decision making based off those. Anger, greed, fear are some of the most common emotions, especially when money is involved. Grid trading bots operate on a specific set of rules, which lower the need to act on emotions in trading significantly. Using a grid strategy are useful for executing disciplined and controlled trades.
4. Risk management
Using a grid trading bot allows you to configure the settings manually, which can impact not only your profitability, but also your risk level. For example you can opt to choose for a strategy that yields small but steady profits with small profits, or you can choose to go for bigger stakes and chunkier returns. Also here, the losses you will take dont necessarily involve manual treatment, and therefore also your risk management will be less prone to emotions playing a role in the decision making process.
Diversification is the act of spreading your funds among multiple assets. Rather then simply holding the asset, you can earn extra profit by using the grid trading strategy to make more money from the fluctuations between the prices of the multiple assets in your portfolio. Not only that, the use of various strategy can also be classed as diversification, as you implement different approaches.
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