- BitKan is a crypto aggregator that offers free built-in automated trading bots.
- Grid trading is now seen positively, thanks to the innovative solutions from BitKan.
- For BitKan, using trading bots presents more advantages than the traditional trading system.
PlanB, a well-known anonymous analyst known for his Bitcoin S2F prediction model, said in his recent Twitter post that “when Bitcoin is in all time high mode (colour turns red), it usually stays in ATH (red) for a couple of months.” This trading strategy is commonly known as grid trading.
Many people will be surprised to know that the idea of grid trading is not new. The trading system can be traced back to Claude Elwood Shannon. In 1970, Shannon proposed a grid trading strategy aimed at a profitable investment portfolio. By 1986, the average annual return of Shannon’s portfolio was 28%, whereas Warren Buffet, one of the world’s most successful investors, acquired a return of 27% during the same period. In comparison with the performance of more than 1200 mutual funds at that time, Shannon’s investment performance far exceeded more than 1000 of them.
In the traditional financial market, grid trading can maintain an annual rate of return between 10 – 50%. On the flipside, grid trading often brings higher returns to cryptocurrencies due to its inherent nature of being more volatile. By buying low and selling high based on a pre-determined price point, the trading strategy is profitable as long as there is constant market fluctuation. Even though the notion of grid trading is simple, it is difficult to execute in reality. When traders attempt to put grid trading into practice, they tend to go through several phases:
- Phase 1: Trial of Grid Trading.
- Phase 2: Insignificant Profits or Minor Losses.
- Phase 3: Leverage on Time to Capitalize Market Fluctuation.
Most people fall in the category of Phase 2. It is a pity, as the grid trading strategy is effective and has been proven over time. In order to fully optimise the grid trading strategy, there is a need to understand the strategy, coupled with understanding ourselves well. This article will introduce BitKan’s “All-In-One” Grid Trading Strategy to get traders closer to Phase 3. The strategy is simple and easy to implement. Most importantly, it ensures that profits are consistently generated from capitalizing on the volatile market fluctuations. Below is the result of a 6-month live trading data which shows the effectiveness and result of the All-In-One Grid Trading Strategy.
There are three sections to know about Grid Trading Strategy:
- Section 1: The Principle of Grid Trading.
- Section 2: Benefits of Using a Bot for Grid Trading.
- Section 3: Optimisation of Grid Trading by Using All-In-One Grid Combination.
1. The Principle of Grid Trading
The price range is distributed into a grid, and the funds are divided into a number of equal parts. As soon as the price of an asset reaches one of the pre-determined lines above the current price, it is time to sell. Likewise, when the price reaches a pre-determined low point, it is time to buy. The difference between buying low and selling high of each cell forms the profit. Traditionally, grid trading is done by manually plotting out the pre-determined lines with physical monitoring of the market to execute trade orders. However, this is extremely troublesome and lacks productivity in capturing the ebb and flow of the cryptocurrency market.
2. The Advantages and Disadvantages of Grid Trading
In order to fully execute the grid trading strategy, traders have to analyse the charts around the clock. But it is impossible to keep an eye on the market all the time. After all, humans need to sleep. Furthermore, we tend to be emotional too. This means that there will be moments of experiencing a fear of missing out and panic selling, especially in moments of pumps and dumps.
A grid trading bot is a solution to these issues. A grid trading bot allows traders to automate their investing strategy, which helps to buy and sell 24/7 even while we are asleep. Instead of letting trading opportunities go to waste while we are fast asleep, a grid trading bot can leverage the non-stop volatility of the cryptocurrency market, capture the fluctuation and produce profit consistently. The more frequent the market fluctuates, the wider spread of returns for the trader. As a result, traders no longer need to worry about the best time to enter or exit a trading position.
3. Optimisation of Grid Trading
An easy way to understand grid trading is to imagine that the grids are fishing nets that help to fish for profits. A large fishing net allows us to catch big fish, but chances are there will not be a high volume. In comparison, a small fishing net may not catch any big fish at all, but there is a higher tendency of it catching a lot of small fish. Instead of simply using only a large, medium, or small grid and missing out on potential gains, the All-In-One Grid Trading Strategy combines all three grids to ensure all fishes are caught.
The All-In-One Grid Trading Strategy does not simply sound good in theory, but it also works in practice too. These numbers will tell the story:
- Start of All-In-One Grid Trading Strategy: June 22, 2021 (120 days).
- Large Grid Cumulative Revenue: 278.87611 USDT.
- Medium Grid Cumulative Revenue: 320.78290 USDT.
- Small Grid Cumulative Revenue: 197.17546 USDT.
- Combined Cumulative Revenue: 796.83447 USDT.
- Bitcoin (BTC) Realized Return: 26.02%.
By buying and holding BTC in the same period, the maximum retracement of BTC is -9.97%, and the realized return is 26.02% with a 84.10% annualized rate of return. On the other hand, the All In One Grid Trading Strategy had a maximum retracement of 0%, and the realized return is 30.41% with a 92.15% annualized rate of return. This means that traders are better off using an automated trading bot to capture the fluctuations of BTC in the same period as compared to only holding it. The All-In-One Grid Trading Strategy consists of infinite grids with different spacing, which enhances the overall robustness of the strategy by overcoming internal fear and greed, and successfully stomaching the profits of each band.
Function of Grid Interval
Large, medium, and small grids have their own specific function. In order to capture large profits across the board, the All-In-One Grid Trading Strategy leverages on using higher target profit to form large grid parameters. This means that whenever there is a significant price movement, the bot will capture the price action. In order to capture medium to high profit action, traders may lower the target profit to form medium grid parameters. Even though the grids that it covers may not be as wide as large grid parameters, the goal is to capture short to medium price profits. This approach is good for assets with considerable volatility. Also, it is recommended to use small grid parameters. At first glance, it may seem inferior as compared to medium or large grid parameters. But, the aim of small grid parameters is to earn even the tiniest of fluctuation and be stoic, especially in times when price action becomes too volatile. Rather than focusing on only one specific grid and missing out on potential gains, the All-In-One Grid Trading Strategy combines all three grids to produce promising returns.
Grid trading is often thought to be labour-intensive, and trading bots are often thought to be sophisticated to set up. But, these myths are not true. BitKan is one of the few cryptocurrency exchanges that offer free in-built bots that are easy to grasp and can be set up in less than a minute. The smart trade platform uses grid trading as part of its bot trading strategy to help traders achieve the goal of maximising profit. Currently, BitKan is offering an exclusive 100 USDT Newbie Gift which contains a 50 USDT premium insurance, so that traders can begin using the grid trading bot with full assurance.
Founded in 2012, BitKan is a cryptocurrency exchange that offers free built-in automated trading bots. With aggregated liquidity generated across 8 leading exchanges such as Binance and FTX, and over 800 cryptocurrency tokens to trade with, traders gain a competitive advantage with the best prices available in the market. Furthermore, with low trading commission fees and a fully fleshed-out mobile app, BitKan is an excellent choice for mobile investors who do the majority of their trading on the go. Bot trading is now made effortless and easy in just a few clicks. Based in Singapore and Japan, BitKan holds the Digital Asset Exchange License from the Financial Services Agency of Japan, and has been operating securely with safety as its top priority.
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Disclaimer: The views and opinions expressed in this article are solely the author’s and do not necessarily reflect the views of CoinQuora. No information in this article should be interpreted as investment advice. CoinQuora encourages all users to do their own research before investing in cryptocurrencies.