Grid trading is a trading strategy that seeks profit from market fluctuations by positioning buy orders and sell orders.
The system will place buy orders when the price drops and sell orders when the price climbs over the base currency at set intervals around the set price to profit from the market trends.
The total profits of the running bots are combined with realized profits (grid profits) and floating PNL. We will take a closer look at the grid profits for this article, but before that, we need to have a better understanding of grid interval, the reason being the grid interval will affect the grid density which will finally have an impact on the profit of each grid.
To begin with, we need to figure out two basic concepts:
Grid Interval = (Max. Price - Min. Price) / No. of Orders Placed
Grid Profits = Price gap between grids * Purchase amount of the grids * No.of the filled orders
Grid interval is based on the maximum and minimum price setting and the number of orders placed. Suppose that we are going to trade XXX/USDT, the Min. Price is 3 USDT, Max. Price is 15 USDT, and the No. of Orders Placed is 4, then the interval is (15 - 3) / 4 = 3. So the maker price will be 3 USDT/6 USDT/9 USDT/12 USDT/15 USDT, 5 positions in total.
This shows that different price ranges and number of order settings will finally affect the grid density.
The higher the grid density, the more frequent the trades will be executed, thus profit for each grid will be lower; whereas, the lower the grid density, the less frequent the trades will be executed, ultimately the profit for each grid will be higher.
Apparently, the grid profits are determined by the price gap between grids, purchase amount of the grids and number of the filled orders. You may be surprised that the profit gaps between different grids can be up to dozens of times depending on the price range, number of orders placed and the entry price. Essentially, the very first time when the bot executes the sell order of the grid, it will be matched with the entry price, following the second time of the sell order of the grid, which will be matched with the last sell order price. Therefore, the profit gaps between the grids could be that much.
Suppose that, for the trading pair XXX/USDT, the entry price is 3 USDT, the grid interval is 1 USDT, the buying quantity for the grid is 1, the selling price for the orders are 4 USDT/
5 USDT/ 6 USDT/ 7 USDT / 8 USDT…..30 USDT;
When the price for XXX/USDT first hits 25 USDT, the grid will be sold matching the entry price of 3 USDT. It is easy to calculate that the profit for this grid is 25 USDT - 3USDT = 22 USDT;
Immediately after the price for XXX/USDT bounced back to 24 USDT, and rises up to 25 USDT again, the grid will be sold based on the last selling price 24 USDT instead of the entry price, so the profit for this grid is 25 USDT - 24 USDT = 1 USDT;
Following, the price for XXX/USDT goes up from 25 USDT to 28 USDT, the selling price at 28 USDT is the first time being triggered. Thus, the grid will be sold according to the entry price of 3 USDT again, so the profit for this grid is 28 USDT - 3 USDT = 25 USDT.
Briefly speaking, in the course of price movement for XXX/USDT, the profit for the three grids are 22 USDT - 1 USDT - 25 USDT, the difference between the lowest and the highest is 25 times, which is normal. We only need to remember that when the selling price of the order for the grid has been triggered for the first time, it will be matched with the entry price, then from the second time onwards, it will be matched with the last sell order price.
Now you’ve learned much about grid interval and grid profits, go start and try it now!