Grid bots are a powerful trading tool when tuned to the market conditions
Let’s start with a quick recap of what a Grid bot does and what market conditions it works best in. When the market for an individual token is stuck swinging up and down without any consistent upwards or downwards trends, it’s called a sideways market. Think of a token that swings between $8-10 in price and has been doing that for weeks or months.
To a hodler, this is a dead coin that they don’t want because it’s not showing a long-term potential to accelerate upward and deliver a big return on investment. But to a trader with a good grid bot, this coin is a money-printing opportunity because they can take advantage of the up and down somewhat predictable pattern of the coin.
Using a grid bot, the trader sets up a horizontal grid of buy and sell lines at different price points. If we use the example of the coin that fluctuates between $8-10, as the coin dips down below the $9 median baseline, the bot buys the coin in increments at each grid line. If the trader has the grids $0.10 apart, then it will buy some points at $8.90, more at $8.80, and continue until it hits the bottom grid line of $8.10. It’s generally considered best practice to put your lowest grid line above, not at, the support price.
Then when the coin starts swinging back upwards, the bot will start selling in increments at each gridline. So it will sell some coins at $9.10, some more at $9.20, etc. until it hits $9.90. Much like putting the final buy line at the support price point isn’t a best practice, putting the final buy line at the resistance price line is also not usually considered to be a wise choice by experienced traders.
So now we’re clear on how a Grid bot works and what kind of market conditions it excels at, let’s take a look at what we can do to make sure it’s giving the best performance.
Delete or expand upper and lower grid lines to tune your Grid bot for max profitability.
Market conditions can change quickly, even in sideways markets, and a common thing is for traders to discover that support and resistance lines for the token they’re trading have changed. It could be that the price range has contracted, or it could have also grown a bit more volatile and expanded.
So here’s what experienced traders in our community recommend you do. If your grid lines are too wide, and your bot is leaving funds allocated to those lines idle, then you need to delete some of your upper and lower grid lines. You can do this by editing your bot to set new upper and lower limits, but this will cancel all the orders your bot has placed. Your bot can always place new orders, but you might miss out on a few profitable trades while you’re reconfiguring. As a solution, you can simply delete the upper and lower grid lines that don’t have any active orders to dial your bot into the current active price range of that token. You won’t miss out on any orders, and you won’t miss out on any profits.
In the second case, when the support and resistance levels have expanded beyond your grid, unfortunately, you will need to stop your bot to edit it. We suggest you look at the timing of your trades and try to pick a time when your bot is showing the least activity. It’s pretty simple from there. You can either add more lines to your existing grid, or you can recalculate your grid to space out your lines more. As we stated at the beginning of the article, the best practice is to set your highest line below the resistance level, and your lowest line slightly above the support level.
One last example involves adding a stop-loss order between your upper and lower limits. Unfortunately, the bot does not allow this. If you want to prevent a possible imbalance in the existing grid, you can individually delete only those orders that prevent your new stop loss from being placed closer.
We hope this helps you optimize your grid bots, or to try one out for the first time. It’s pretty easy, you just need to look at the charts and find a token that’s been moving sideways consistently and then set up your bot using the appropriate settings.