I. What is spot grid trading?
Spot grid trading is a strategy that automates buying and selling in the spot market. It is designed to place orders in the market at preset intervals within a configured price range. Before getting started, a user only has to set the upper and lower prices of the range and the number of grids. The trading bot will automatically place a grid of orders to buy low and sell high, allowing the user to profit from the volatile market.
II. When to use spot grid trading?
Spot grid trading is all about volatility arbitrage. This is why the strategy performs best in volatile markets and markets that rise in volatility. You may suffer losses when running a spot grid bot in a downturn market.
III. How do I set up a spot grid trading bot?
(1) Log in to Poloniex's website and choose Trade > Strategy Trading.
(2) Set up the bot parameters manually or select "AI Strategy", then enter the amount of funds you want to invest and create a bot. The funds invested in a grid strategy will be set apart from the spot account and used exclusively for the strategy.
(3) You can view and manage the running bots by clicking “Active” at the bottom of the page.
(4) You can withdraw the profits generated by the trading bots or stop a running bot anytime.
Two ways to set the parameters of a trading bot:
Manual: Set up the parameters based on your market analysis.
AI strategy: Use the parameters recommended by AI. (Check here to see how the AI strategy parameters are calculated)
Lower price: The bot will stop placing orders when the market price is below the lower price.
Upper price: The bot will stop placing orders when the market price is above the upper price.
Grid number: Grid number refers to the number of intervals in the price range. For example, if the price range is 100-400, the mode is arithmetic, and the grid number is 3, then there are three intervals in the price range: 100-200, 200-300, and 300-400.
Invest coin: Users can choose to invest in the base token or the quote token, or invest in both of them.
Invest amount: The amount of the token invested in the grid trading strategy of which the max available amount represents the maximum amount of the token that can be transferred out from the spot account.
Arithmetic grid: Each grid has an equal price difference (e.g., 1, 2, 3, 4...).
Geometric grid: Each grid has an equal price difference ratio (e.g., 1, 2, 4, 8...).
Take profit price: The grid trading bot will stop running when the market price reaches the predetermined take profit price.
Stop loss price: The grid trading bot will stop running when the market price reaches the predetermined stop loss price.
3.3 Example (the BTC/USDT market)
Lower price: 50,000 USDT
Upper price: 100,000 USDT
Grid number: 50
Grid mode: Arithmetic
Invest amount: 5,000 USDT
BTC/USDT price when the grid is created: 60,100 USDT
Phase 1 - Order placement: Orders will be placed within the grid's price range at a 1,000 USDT interval, in this case at 50,000, 51,000, 52,000...98,000, 99,000, and 100,000 USDT respectively. In a market with ideal depth, buy orders will be placed from 50,000 USDT to 60,000 USDT, while sell orders will be placed at 62,000 USDT and higher prices.
Phase 2 - Grid strategy runs: When the market price drops below 60,000 USDT, then the buy order at 60,000 USDT will be executed and a sell order will be automatically placed at a price 1,000 USDT above that of the executed buy order, which is 61,000 USDT. Similarly, when the market price goes up, a buy order will be placed at a price 1,000 USDT below that of the executed sell order.
As the market rises and falls, orders will be placed and executed within the configured price range, allowing the trader to profit from market volatility.
4.1 No actions will be taken by the bot when the market price drops below the grid's lower price. If the market price remains below the grid's price range, the trader may suffer losses. It is hence recommended that a proper stop loss price be set below the grid's price range to limit losses.
4.2 The funds invested in a grid strategy will be set apart from the spot account and used exclusively for the strategy. Users hence need to pay attention to the potential risks caused to their spot positions when funds are transferred out from the spot account for grid trading.
4.3 If the user chooses "Sell all base coins on stop" when setting up a grid strategy, then the base coins will be automatically sold at the market price when the strategy is manually terminated or terminated by a stop grid trigger. However, the sale may fail if it is deemed to cause market risks; in this case, the user needs to decide whether to continue to sell the coins or not.
4.4 A grid strategy will be automatically terminated in the event of trading suspensions, delisting of any crypto involved, or other exceptional and unforeseen circumstances.