Main conclusions
Grid trading automates the trading of futures contracts by allowing orders to be placed at specified intervals within a specific price range.
This tool is effective in markets where prices fluctuate within certain boundaries as it automatically executes trades based on a predefined grid.
This strategy is suitable for traders who prefer to approach trading systematically and make money on market volatility.
Binance Futures offers a grid trading tool that automates the buying and selling of futures contracts. This is a trading bot that allows you to place orders at specified intervals within a specific price range.
Grid trading is suitable for use in volatile and sideways markets, where prices fluctuate within a given range, as it allows you to profit from small price movements. In this article, we provide a step-by-step guide to setting up grid trading on Binance Futures.
How does grid trading work?
Grid trading is a strategy that allows you to place orders at gradually higher and lower prices within a specified price range. This tool is effective in markets where prices fluctuate within certain boundaries as it automatically executes trades based on a predefined grid.
For example, a trader can place buy orders for BTC every 1,000 USDT below the current market price, as well as sell orders every 1,000 USDT above the market price.
When grid trading is initiated, the system divides the asset price range into several grid levels and sets pending orders for each of them. When the price of an asset falls, a buy order is executed and an immediate sell order is placed at a higher price. When the price of an asset rises, a buy order is placed at a lower price. This strategy allows you to buy low and sell high, thereby making a profit in a volatile market.
Advantages of grid trading
The grid trading strategy on Binance Futures gives traders access to a range of benefits. Some of them are listed below.
Automation. By automating the process of buying and selling futures contracts, traders can execute their trading strategy without making emotional decisions.
Systematic trading. A trading grid is built by systematically placing limit orders at certain intervals within a predetermined price range.
Profit from small price changes. Placing orders at predetermined intervals makes it possible to make money even on minor price movements.
Automatic setup. With the automatic parameter selection feature, any user can create a grid trading strategy with one click.
Personalization of grid parameters. Advanced traders can manually adjust grid parameters, profiting from trading within a predetermined price range.
Access to leverage. Binance Futures allows traders to use leverage when trading grids. It can be used to profit in both rising and falling markets by buying low and selling high in an uptrend and, conversely, selling high and buying low in a downtrend.
How to Use Grid Trading on Binance Futures
Below is how to set up a grid trading strategy.
From the Binance Futures page, select Trading Strategies > Futures Grid from the menu.
Select a contract pair. Then select the contract for which the trading bot will be used. In this example we will use the BTCUSDT perpetual contract.
In the sidebar, you can select Auto mode (recommended settings) or Manual mode (adjust the grid parameters yourself). In this example, we will set the grid parameters manually.
Decide on the direction of the order. On the trading grid panel, select one of three options: neutral, long or short.
With a neutral strategy, the system will execute short orders when the price rises above the set point, and long orders when the price falls below this point.
In the long grid strategy, the buy order is placed first, while in the short grid strategy, the sell order is placed first. For example, a trader who is bullish on Bitcoin might apply a long grid strategy to the BTCUSDT contract.
Specifically, it can place buy orders at different intervals below the current market price and sell orders at different intervals above n.
Select a grid type. You can choose one of two preset modes: arithmetic or geometric. In arithmetic mode, the price difference has the same values, and in geometric mode, the price difference has the same coefficient.
Select a price range. Enter the range in which you expect the BTC price to move. Let's say you expect the price of BTC to fluctuate between $20,000 and $30,000 in the next 24 hours. With this strategy, the trading bot automatically places buy orders at lower prices when the BTC price drops to $25,000 and sell orders at higher prices when BTC begins to recover. Thus, the trader makes money on price fluctuations.
Specify the frequency of lines in the grid. Specify the number of orders that will be placed within the specified price range. The more lines you have, the more trades you make, but the profit from each of them will be less. So you are choosing between small profits from each of many trades and large profits from fewer trades.
Set the initial margin. The system will automatically determine the initial margin value depending on the number of lines, leverage and the price range you select. It is important to remember that the higher the line frequency, the higher the initial margin will be.
Conclusion
This strategy is suitable for traders who prefer to approach trading systematically and make money on market volatility. For grid trading to be profitable, it is important to understand in what market conditions it should be used. This will help you avoid losing money in a trending market.
In addition, a competent risk management strategy is required, including correctly configured take profit and stop loss orders.
Additional Information
(Blog) Benefits of Grid Trading on Binance Futures
(Blog) Crypto Futures Risks and Money Management: 5 Ways to Better Manage Risks When Trading
(FAQ) Guide to setting automatic parameters for futures grid trading
(FAQ) Grid trading in long/short mode
Risk Warning: The grid strategy should not be considered financial or investment advice for Binance. Grid trading is used at your own discretion and risk. Binance is not responsible for any losses that may arise from your use of this feature. Users are advised to read and ensure that they fully understand the Grid Trading Instructions, and ensure that they control risks and take a prudent approach to trading, taking into account their own financial capabilities.
