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What is Spot Grid Trading and How Does it Work?

2022-01-06 07:57
Tutorial Video
Grid trading is a type of quantitative trading strategy. This trading bot automates buying and selling on spot trading. It is designed to place orders in the market at preset intervals within a configured price range.
Grid trading is when orders are placed above and below a set price, creating a grid of orders at incrementally increasing and decreasing prices. In this way, it constructs a trading grid.
Binance Spot Grid Trading performs the best in volatile markets when prices fluctuate within a specific range. Essentially, grid trading attempts to make profits on small price changes. Through quantitative trading, it helps you trade rationally and avoid FOMO where possible.
Risk Warning: Grid trading is a trading tool that should not be regarded as financial or investment advice from Binance. Undisciplined setting, unilateral quotation, market prices out of the grid range, all of the above scenarios will result in losses. Grid trading is used at your discretion and at your own risk. Binance will not be liable for any loss that might arise from your use of the feature. It is recommended that users should read and fully understand the Grid Trading Tutorial and make risk control and rational trading within your financial ability.

How does Spot Grid Trading strategy work?

1. Log in to your Binance account on the Binance website, and click [Trade] - [Strategy Trading] - [Spot Grid]. Select a trading pair.
Alternatively, go to the Binance App and tap [Trade] - [Spot] - [...], choose [Spot Grid].
Before you set up a strategy, you need to read and agree to the Risk Disclosure Statement first.
2. Select either the [Arithmetic] or [Geometric] mode. Set the grid parameters, including the upper and lower price, grid number, and the coin to invest.
The system will calculate the minimum investment amount required based on the grid number and coin you selected. Enter the amount to invest and click [Create] to place your order.
Please make sure that you have sufficient balance in your Spot Wallet.
App:

Spot Grid Trading parameters:

2.1 Arithmetic & Geometric mode
  • In arithmetic mode, each grid has an equal price difference.
  • In geometric mode, each grid has an equal price difference ratio.
  • The more grids you include, the more funds you need to invest.
Arithmetic mode: Each grid has an equal price difference(e.g. 1, 2, 3, 4...).
The arithmetic grid divides the price range from Lower Price to Upper Price into the number of grids by equal price difference.
The price difference of each grid is:
Spread = (Upper Price - Lower Price) / Number of grids
The price distribution will be as follows:
Price_1 = Lower Price
Price_2 = Lower Price + Spread
Price_3 = Lower Price + Spread * 2
Price_n = Lower Price + Spread * (n-1)
The highest price is Upper Price, where n = the number of grids.
Example: Arithmetic Grid = 100: 1000, 1100, 1200, 1300, 1400,... (the next price is 100 higher than the previous one)
Geometric mode: Each grid has an equal price difference ratio. Price range of each cell of the geometric grid is proportional (e.g. 1, 2, 4, 8...). The profits are fixed between each grid.
The geometric grid divides the price range from the Lower Price to the Upper Price into the number of girds by equal price ratio.
The price ratio of each grid is:
Ratio = (Upper Price / Lower Price) ^ (1/n) * 100%
n = the number of girds
The price distribution will be as follows:
Price_1 = Lower Price
Price_2 = Lower Price * Ratio
Price_3 = Lower Price * Ratio ^ 2
Price_n = Lower Price* Ratio ^ (n-1)
The highest price is the Upper Price, where n = the number of grids.
2.2 Lower Price and Upper Price
Lower Price: Bottom of the grid trading price range. The system will no longer execute orders when the market price is lower than the Lower Price.
Upper Price: Top of the grid trading price range. The system will no longer execute orders when the market price is higher than the Upper Price.
2.3 Grids
Divide the interval upper limit price and interval lower limit price into corresponding shares.
2.4 Invested Coin
You can choose to invest in single or dual crypto.
For example, if you chose to invest by BTC, the strategy will only use BTC from your Spot Wallet. If you choose to invest by BTC+BNB, the strategy will use both BTC and BNB from your Spot Wallet.
Please note that the actual investment amount required for the Grid Trading strategy depends on the market and may not equal the amount you entered.
2.5 Available amount
The available assets in your Spot Wallet.
Your grid creation might fail if there is insufficient balance in your Spot Wallet. Please note that the frozen assets from other open orders cannot be used to place new orders. You can cancel your open orders to utilize your available assets, or adjust the number of grids to reduce the investment amount required to open orders.
2.6 Trigger Price (Optional)
The grid orders will be triggered when the Last Price rises above or falls below the trigger price you entered.
2.7 Stop Trigger (Optional)
You can use Stop Trigger to stop trading when the market price triggers the set prices:
  • Stop Loss: should be less than the lower price, last price and trigger price; when the latest market price reaches the Stop Loss price, the grid will stop working.
  • Take Profit: should be higher than the upper price, last price and trigger price; when the latest market price reaches Take Profit price, the grid will stop working.
For example, if you create a BTC grid order with no trigger price, a certain percentage of BNB will be immediately bought at the market price for opening the grid trading. If you set a trigger price, the system will wait for the market price to hit the trigger before buying BNB at the set price.
If you have both BTC and BNB in your Spot Wallet, you can also choose to invest in BTC+BNB to avoid the additional expense (e.g. transaction fees) incurred when buying BNB.
2.8 End
Click [End] to stop grid operation. Running orders will be canceled and all profits will be settled immediately at market price.
Spot Grid Trading follows the spot market trading rules. You need to abide by the rules when placing orders.

How to check my Spot Grid orders?

1. For running orders:
To check your order progress, click the [Running] tab and click on the order icon next to the order.
App:
2. You will be redirected to the order details page.
Web:
App:
You can check the order progress under each tab:
  • Working: Your on-going Grid trading orders;
  • Completed: Orders already filled under this strategy;
  • Grid Details: Details of your grid settings. You can still set or edit the Stop-Trigger price under Advanced Settings after the grid has been created.
3. For past orders:
Click on the [History] tab to check your grid trading history and view grid details of completed orders.

How to set up a Grid Trading strategy?

You can use Grid Trading strategy to buy low and sell high. Let’s use BTC/BUSD as an example. Suppose your strategy parameters are set as below:
  • Upper price: 60,000 BUSD
  • Lower price: 40,000 BUSD
  • Number of grids: 5
  • Mode: Arithmetic
  • Amount invested: 10,000 BUSD
  • Current price of BTC/BUSD: 50,000 BUSD

The price structure of this strategy will be placed at 60,000 BUSD, 56,000 BUSD, 52,000 BUSD, 48,000 BUSD, 44,000 BUSD, and 40,000 BUSD according to the parameters you set.
Binance Spot Grid Trading uses normal grids. Orders are placed from the top grid to the bottom grid. When a buy order is filled, a sell order will be placed on the grid above it. As the upper price is set at 60,000 BUSD, the grid strategy will begin by placing a buy order at 56,000 BUSD. This buy order price is higher than the current price (50,000 BUSD), so in theory it will be immediately filled. After the 56,000 order is filled, a new sell order will be placed at 60,000 BUSD. When the buy order at 52,000 BUSD is filled, a sell order of 56,000 BUSD will be placed accordingly and reaches the 48,000 BUSD grid. As the current price is 50,000 BUSD, the buy order at 48,000 cannot be filled, therefore no orders will be placed at 52,000 BUSD. Similarly, the buy orders at 44,000 and 40,000 BUSD will not be filled.
This is how Grid Trading calculates the actual amount of base currency needed for placing orders and paying transaction fees. It will then automatically place market orders to buy the base currency needed for the grid. When the grid strategy is successfully activated, the order placement will be as follows:
Price (BUSD)Order Type
60,000Sell
56,000Sell
52,000No orders will be placed
48,000Buy
44,000Buy
40,000Buy
After implementing Grid Trading, when the current price drops to 48,000 BUSD, the buy order will be filled and a sell order will be placed at 52,000 BUSD. When the market price pulls back to 52,000 BUSD, the sell order will be filled and a buy order will be placed at 48,000 BUSD to buy low and sell high.
When the BTC price rises above 60,000 BUSD or falls below 40,000 BUSD, the strategy will be suspended. When the price returns to the price range you set, the strategy will resume.
*Risk Warning: The above parameter settings are for reference only. Crypto trading carries substantial risk and the possibility of both significant profits and losses. The information here should not be regarded as financial or investment advice from Binance. All trading strategies are used at your discretion and your own risk. Binance will not be liable to you for any loss that might arise from your use of Grid Trading. We strongly recommend you to set stop-trigger orders in advance to prevent uncontrollable market movements from causing irreparable losses.

Frequently Asked Questions

1. Why is my Grid Trading strategy terminated/canceled?
  • The market price has hit the stop-trigger price you set.
  • The trading pair of your strategy is delisted or will be delisted soon.
  • The number of orders you have in the strategy has reached the maximum number you can place for that trading pair.
  • There is insufficient balance in your Spot Wallet and orders cannot be placed.
2. Which wallet balance is utilized for Spot Grid Trading?
Spot Grid Trading utilizes assets in your Spot Wallet to make investments. You can check the PnL of your running orders from the Spot Wallet history.
3. How is profit calculated if I manually cancel or close the Grid Trading strategy?
All profits will be settled immediately at market price when you manually cancel or close the grid strategy.
4. How are the trading fees calculated?
Spot Grid Trading follows the spot market trading fee rates. Please check the Trading Fee page for more details.
5. Why do I need to deposit trading fees in advance?
When you launch a Spot Grid Trading strategy, you need to deposit a certain amount of the base currency as 'bid price'. It will be used as a reserve for deducting the Grid Trading fees. When the system detects that the reserve amount falls below half, it will automatically place buy orders for the base currency to refill the reserve. You can check the buy order details under the [Completed] tab on the Grid Trading order details page.
Important Notes:
  • The system will not freeze your assets when running the grid strategy. If you transfer the base and the quote currencies out of your Spot Wallet when the Grid Trading strategy is still running, there is a risk that the available balance will be insufficient for placing the next order and might cause the strategy to be terminated. Therefore, please check your order status before transferring assets out of your Spot Wallet.
  • If both the base and the quote currencies of your running grid strategy have enabled the automatic subscription function on Binance Savings, the transaction fees reserved will be automatically transferred to Flexible Savings, which might cause the grid strategy to be terminated due to insufficient balance. Therefore, please check whether you’ve enabled the automatic subscription function on Binance Savings for the base and the quote currencies before running the grid strategy.
6. What are base currency and quote currency?
Base currency and quote currency are the basic units of a trading pair. A quote currency is used to determine the value of the base currency.
For example, in the BTC/BUSD trading pair, BTC is the base currency and BUSD is the quote currency.
7. ​​What does the order state represent?
  • New: When the grid is created but not triggered.
  • Working: After the grid is triggered.
  • Expired: Grid trading strategy terminated.
  • Canceled: User manually ended the grid strategy.
8. Why is my Gird Trading order terminated after I canceled all spot trading open orders?
All Grid Trading orders will be displayed under the [Open Order] tab on the Spot Trading interface. If you cancel an order that belongs to your Grid Trading strategy, the strategy will also be terminated.
If you switch to the trading pair that is currently running Grid Trading, you will see a notification on the right of the screen, please check carefully before you cancel open orders.
9. Why can’t I place a dual crypto grid strategy?
You may encounter an error message prompting you to invest in one crypto only.
This error occurs when the second-highest-priced grid is below the current market price of the trading pair. Please adjust the upper price further from the current market price in order to place a dual crypto spot grid strategy successfully.
Example:
BNBBUSD spot grid arithmetic strategy, upper limit: 600 BUSD, lower limit: 100 BUSD, grid quantity: 5.
The 5 grid price points would be 600, 500, 400, 300, 200, 100 BUSD.
Current market price: 520 BUSD
The second highest grid price (500 BUSD) is below the current market price (520 BUSD). In this scenario, you will not be able to place a dual crypto investment strategy.

However, if you increase your upper limit to 700 BUSD, this strategy’s grid price points would be 700, 580, 460, 340, 220, 100 BUSD. The second-highest grid price (580 BUSD) will now be higher than the current market price (520 BUSD), you then will be able to place a dual crypto investment strategy.

Glossary:

  • Lower Price: Bottom of the grid trading price range. The system will no longer execute orders after the market price is lower than the Lower Price.
  • Upper Price: Top of the grid trading price range. The system will no longer execute orders after the market price is higher than the Upper Price.
  • Grids: Divide the interval upper limit price and interval lower limit price into corresponding shares.
  • Arithmetic/Geometric Mode:
    • The price difference of each grid of Arithmetic is: Spread = (Upper Price - Lower Price) / Number of grids
    • The price ratio of each grid of Geometric is: Ratio = (Upper Price / Lower Price) ^ (1/n)*100%; n= the number of grids
  • Total Profit: Grid Profit + Unrealized P&L
  • Grid Profit: The realized profit of filled grid orders that are matched by one buy-order and one sell-order. The trading fees incurred during the strategy are already deducted in the Grid Profit.
  • Unrealized P&L: The latest price of the base currency in the current trading pair - the opening price. This is the floating profit/loss of the grid trade caused by the rise or fall in the market price of the base currency.