The idea
A grid lays a ladder of orders across a price range: buys at fixed steps below the current price, and for each one a sell one step higher. When price falls to a buy, it fills; when it bounces a step, the matching sell takes the small profit. Then the order is placed again.
Most crypto exchanges offer grid bots that run this automatically, which is why grid trading is one of the most used crypto strategies.
Watch it play out
Step by step
The rules
Setup
- Choose a range you expect price to stay in, and the number of steps (the grid spacing).
Entry
- Buy orders at each step under the current price.
Stop-loss
- A stop under the bottom of the grid, so a breakdown does not leave you holding every buy.
Target
- Each buy sells one step higher. The grid runs until you stop it or price leaves the range.
Filters that help
- Run grids in sideways markets, not strong trends.
- Make each step wide enough to cover trading fees several times over.
Why it can work
Crypto prices often swing back and forth within a range for long stretches. Each swing through a step of the grid earns one step's profit, so a choppy, sideways market produces many small gains without predicting direction.
Worked example
A coin trades in a range you think will hold. You place buy orders every 1% below the current price, four steps deep, each selling one step higher. Over two weeks price swings down and back up several times, and the replay above completes ten round trips.
Each round trip earns about 1% before fees on the coins it trades. If price instead falls through the bottom of the grid and keeps going, the grid holds every buy at a loss, which the stop is there to cap.
When it works, when it fails
Works best
In long sideways markets with frequent swings, where many round trips complete.
Struggles
In trends. A falling market fills every buy and leaves the grid holding a losing position; a rising one sells everything early and the grid sits idle while price runs away.
Common mistakes
- Running a grid with no stop under it, in a market that is starting to trend down.
- Setting steps so tight that fees take most of each round trip.
- Using leverage on a futures grid, which turns a breakdown into liquidation.
Variations
- Futures grid
- The same grid on perpetual futures, often with leverage, which magnifies both the round trips and the losses.
What the evidence says
Evidence: Popular, untestedWidely used, but no rigorous public testing. An idea to test yourself.
Grid bots are heavily marketed by exchanges, but we know of no rigorous public study showing grid trading earns money after fees across market conditions. Exchange 'top bot' lists show recent winners, not the losers that were stopped.
A grid is a bet that the market will stay in a range. Like every range strategy, it pays while that is true and loses when it is not.
Questions
- How many grid levels should I use?
- Fewer, wider levels mean larger profit per round trip and fewer fills; many tight levels mean more fills but more fees. Each step should earn several times the fee for a round trip.
- How does a grid bot make money?
- By buying at each step below the price and selling one step higher. Every swing through a step completes a round trip and earns that step, before fees.
- What happens if price leaves the grid?
- If it falls below, the grid holds every buy at a loss. If it rises above, everything has been sold and the grid misses the rest of the move.
- Are grid bots safe?
- They are as safe as the market's range is reliable. In a crash a grid buys all the way down, so it needs a stop and no more money than you can afford to lose.