In the field of cryptocurrency, there is a saying that there will be a bull market in four years, and most of the rest of the time we are waiting for opportunities. And grid trading is born in response to market fluctuations. It can increase the utilization rate of investors’ funds, with lower risks, but the returns are much higher than other financial products.
To understand grid trading, we must first understand the essence of secondary market trading: buy low and sell high. Although everyone knows this truth, few investors can do it. Most people are not professional investors and cannot keep an eye on the market at any time. At the same time, due to the shortcomings of human nature, investors can’t help but sell for a little profit, and they are reluctant to stop losses when they lose money. Grid trading makes up for these shortcomings and helps investors buy low and sell high with a set of programmatic trading strategies, without manual ordering, reducing the risk of investors’ emotional trading.
How should ordinary investors understand grid trading?
We can understand grid trading as a fishing net, and the profit can be “captured” by spreading the fishing net in a certain price range (the shock range considered by investors). Grid trading is when investors choose the price range of a certain trading pair and divide this range into multiple prices through a certain interval. As shown in the figure below, we use the USDT/QC trading pair as an example.
From February 4th to February 7th, the price of USDT/QC has been fluctuating back and forth between $0.9806 and $0.9875. This kind of market is particularly suitable for grid trading, and since these two tokens (Currently ZB.com is the only platform that supports these two stablecoin transactions) are stable coins, the probability of unilateral market is very low.
We can set the grid of the price range in the above picture. Suppose you invest $154.6 in a grid transaction and set a total of 5 grids in the range of $0.9806 to $0.9875, and the transaction capital of each grid is $30.92. The trigger price of each grid is as follows:
Buy 1 is the first order to buy and sell 1 is to sell the buy 1 order. Since the price of buying 1 is lower than the price of selling 1, an arbitrage range of buying low and selling high is formed. Each buy order corresponds to a sell order, and the price difference is 1 grid, and there will be no buying orders that are sold at a price that is more than 1 grid away from the buying price. Because the grid trading procedures are all set up to ensure that each buy order can be sold as much as possible and to ensure the smooth flow of funds.
If the market price exceeds the grid interval, the order will not be completed. As shown in the figure below, during the period of grid trading, the USDT/QC price did not pass through the first grid ($0.9861), and the program cannot buy at the price of this first grid. So the first order to buy is on the second grid. Therefore, traders can start grid trading at the peak (or trough) of the K-line they think, so that the grid program can fill the order to a greater extent.
Therefore, this is also the reason why grid trading is suitable for volatile market, rather than unilateral market.
Revenue hypothesis estimates: 15-minute K-line price has 30 bands back and forth in 2 days (48 hours). Put in 1000QC and set a total of 5 grids in the range of $0.9806 to $0.9875. If there is a profit of 0.009QC per grid, the average daily income is 0.009*30*5/2=0.675QC, and the estimated annualized income is 365*0.675/1000=24%.
This annualized rate of return is more than twice as high as the annualized rate of return of Savings.
Recently, ZB.com launched the grid trading function. Users can select [Exchange Basic/pro] in the [Transaction] column of ZB.com official website, and click [Grid Trading] (Currently, ZB.com grid trading only supports PC web pages).
In the grid settings, users need to select Input Coin, fill in Grid Amount, Minimum Price and Maximum price, select Grid Type and fill in Spend Value to start grid trading.
After the above explanation, I believe our users should have no questions about [Input Coin], [Grid Amount], [Minimum Price and Maximum price], and [Spend Value]. However, Arithmetic and Geometric in [Grid Type] seem to be a bit puzzling. What is the difference between them?
In simple terms, Arithmetic means that the spacing of each grid is the same, and Geometric means that each grid has a fixed rise-fall ratio. When should I use Arithmetic and when should I use Geometric? In general, Arithmetic is suitable for inter-community shock arbitrage (such as USDT/QC trading pairs), and Geometric is suitable for large-range shock arbitrage. For novices, it is recommended to start using Arithmetic for inter-community shock arbitrage and wait for a deeper experience of grid trading before practicing Geometric trading.
At present, ZB.com has launched an activity with grid transaction fees as low as 0%. (Only two stablecoin trading pairs, USDT/QC and PAX/USDT) The handling fee for other trading pairs is 0.05%, and more preferential activities will be launched later. Everyone is welcome to use ZB.com grid trading!
