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Let's consider an example in which 0.18 BTC was bought at $50,000, but BTC plummeted and now trades at around $35,000. This is an unpleasant situation, because the investment has lost 30% of its value.
What are the most common options for a trader to solve such a problem?
- One can wait until the price goes back to $50,000 – but no one knows exactly when that might happen.
- Another option is averaging position – purchasing more BTC to bring the average buying price closer to the current trading price. For example, if we buy another 0.18 BTC at $35,000, then we only need the price to rise to $42,500 in order to break even. The downside of such an approach is the need for additional funds to implement it. In addition, the price might drop even further, and the losses may increase.
We would like to introduce you to an alternative way, however, which does not require you to invest additional funds or wait for the price to get back up; you can start turning your losses into profits right away!
The first step is setting up a Grid bot to trade BTC in the $35,000-$65,000 price range. We set the lower boundary at a current price, and then determine the top boundary by keeping in mind that the middle of the range should be at the price we purchased the asset at in the first place. This way, we won't sell out all of our BTCs by the time the price gets back to $50,000 and have the top part of the range to realize potential profits in case of further growth.
Grid bot will first sell some BTC – but with every price drop, the bot will buy it back to sell higher once more. That way, each repeated trade will bring us profits.
Let's see what the bot's settings should be:
Top price limit: $65,000
Bottom price limit: $35,700
Number of Grids: 140
Amount per Grid: 0.0013 BTC
Approximate necessary balance: 0.18070000 BTC
Grids’ width: 0.32% ~ 0.58%
The more Grids you set up in your bot, the fewer "blind" zones it will have. But be careful – you shouldn't place orders too close to each other, in order to ensure that your trading fees do not exceed your income. For your convenience, we have compiled a table of minimum suggested distance between the Grid lines of the bot for different exchanges, based on their standard fees:
Taker Fee %
Minimal Grid width %
Do not forget about the minimum lot size allowed on your exchange for your cryptocurrency. For example, in this case, the exchange set the minimum size at 0.0001 BTC. This limitation affects the number of Grids (orders) that you can place to distribute all available 0.18 BTC.
Every time the price moves out of your bot's lower bound, you will then have the same amount of BTC as you had before this bot was launched – but you will also get some extra income from reselling.
If the price is dropping, you can reconfigure your bot repeatedly until the price finally locks into your bot's range.