What Is Grid Trading?
Grid trading places a series of buy and sell orders at predetermined price intervals (the "grid") above and below a reference price. As price oscillates, buy orders fill on dips and sell orders fill on bounces, capturing profit from each oscillation. The strategy works best in range-bound markets where price moves predictably between support and resistance.
How Grid Trading Works
A typical grid setup: place buy orders every $100 below the current price and sell orders every $100 above. When price drops to fill a buy order, a corresponding sell order is placed above. When price rises to fill a sell order, a corresponding buy is placed below. Each completed buy-sell cycle captures the grid spacing as profit.
Why It Matters for Traders
Grid trading automates the "buy low, sell high" principle within a defined range. It works well in crypto's range-bound periods but can lead to significant losses in trending markets (accumulating inventory on the wrong side). The keys to success: identify genuine ranges (not trending markets), set appropriate grid spacing relative to volatility, and implement circuit breakers to stop the grid if price breaks out of the expected range.