Grid Trading
An automated trading strategy that places a ladder of buy and sell orders at set price intervals above and below the current price, profiting from repeated price oscillation within a range.
Grid trading is an automated trading strategy that places a "grid" of buy orders at set price intervals below the current price and sell orders at set intervals above it, profiting from repeated price oscillation by automatically buying on dips and selling on bounces within that range, without requiring the trader to predict the overall market direction. Each time an order in the grid fills, a new offsetting order is typically placed at the next interval, so the strategy can repeatedly capture small gains as the price moves back and forth.
Grid trading tends to perform best in sideways, range-bound markets with meaningful short-term price oscillation, since it profits from volatility within a range rather than from a sustained directional move — in a strongly trending market, a grid trading strategy can underperform simply holding the asset during an uptrend, or accumulate losses during a sustained downtrend if the price moves consistently below the grid's lower bound without reverting back up.
Examples
- A grid trading bot set up across a defined price range automatically buys each time the price dips to one of its lower grid levels and sells each time it bounces up to a higher one.
- Grid trading tends to underperform in a strongly trending market, since it's specifically designed to profit from price oscillation within a range rather than from a sustained directional move.