What is long/short Grid Trading?
Long/Short Grid is a trend-following strategy that allows users to trade with the market trend within a grid trading system. This means you can open an initial position (long or short) according to your analysis, while simultaneously placing buy-limit and sell-limit orders at predetermined intervals to capitalize on market volatility and ranging conditions.
For example:
A trader could open an initial long position in BTCUSDT to express his bullish view on Bitcoin and simultaneously placing buy-orders at every $1,000 below the market price of BTCUSDT, while also placing sell-orders at every $1,000 above BTCUSDT contract’s market price. This allows him to trade with the underlying trend within a grid trading system.
A critical difference between a long/short grid and a neutral grid is the initial opening position. For a long grid strategy, users will have an initial long position opened. Conversely, an initial short position will be opened for a short grid strategy.
How to place a Long/Short Grid?
In this example, we will be using BTCUSDT perpetual contract.
- Enter the parameters of your long/short grid strategy on the grid trading panel. The key parameters that you must include are:
- The upper and lower boundaries of the price range;
- The number of orders to be placed within the configured price range;
- The width between each grid order;
- Initial margin.
If the current market price is greater than the grid trading range, the grid strategy will start with zero position.
- Assign the initial margin of the position. The system will calculate your Initial Margin value based on the number of grids, leverage, and the strategy’s price range. Note that the denser the grid, the greater the corresponding initial margin.
Please note:
- Note that the denser the grid, the greater the corresponding initial margin.
- Please note that the notional value for each grid order must be greater than the minimum requirement. Reduce the number of grids or increase the initial margin to ensure that each grid’s minimum notional value is met.
- Insufficient Initial Margin Reminder
- When the initial margin is less than the minimum requirement, a notification will indicate the minimum initial margin required to activate the grid strategy.
- Please ensure that your available balance and maintenance margin is higher than the initial margin to avoid liquidation.
- Click [Create] to place your grid order.
Long/Short Grid Profit and Loss Calculation
The profit and loss calculations for a long/short grid strategy consider both the total matched profits and the unmatched profit and loss. In this case, completed transactions are recorded as matched transactions, while partially completed transactions are recorded as unmatched transactions. A matched transaction means that every short position (or long position) in the grid strategy is matched by a corresponding buy order (or sell order).
|
Index |
Definition |
Methodology |
|
Unmatched P&L |
The profit and loss of unmatched grid transactions |
(The latest contract price - unmatched grid pair’s average price) * Unmatched volume |
|
Total Realized P&L |
Total realized Profit & Loss since inception |
matched grid income + unmatched grid profit and loss |
|
Yield |
Total return ROI |
ROI = total profit / initial_margin * 100% |
|
Annualized Rate of Return |
Annualized Total Return APR |
APR = ROI * year/T, T is the running time of the strategy |
Advanced Settings
The Grid trading bot has advanced functions that enable you to better manage positions and risks. One of which is the trigger price. The trigger price is a predetermined price level at which the grid trading bot is activated. This allows you to dictate when the system will be active when market conditions meet your criteria.
When the grid trading bot is triggered, the system will divide the asset price range into several grid pending orders based on your parameters. When the price of an asset falls, the buy-order will be executed, and at the same time, a sell-order will be placed immediately at a higher price level. When the asset price rises, the order will be placed at the lower price level immediately when the sell order is executed. This strategy allows you to buy low, sell high and profit from market fluctuations.
In addition, you can set stop losses for grid positions.Once the price of the asset is below or above the stop loss range, your entire grid position will be closed. This function guarantees that your positions will be protected from huge losses when the market behaves unfavorably.
To monitor trading activity, click the [Active Grid] tab to find grid trading details.
To end the grid trading system, click [Terminate].