What is Unlimited Grid Trading？

Preface

The cryptocurrency market is extremely volatile, and many investors who are new to this space may feel overwhelmed. People have witnessed 90% declines during bear markets and tens or even hundreds of times increases during bull markets. There is a high risk of losing money when chasing the trends without a good entry and exit strategy.

To adapt to and profit from the elusive market, a systematic trading strategy must be developed and strictly followed. Grid trading is a popular strategy that involves buying cryptocurrencies within a set price range, selling them in batches on the upside, and buying them in batches on the downside, in order to profit from market fluctuations’ spreads. The Unlimited Grid is based on a grid trading system that adjusts capital usage during trading so that you can continue to buy on the downside to spread the cost while always having coins to sell on the upside.

What is Grid Trading

Grid trading is one of the simplest quantitative strategies, suitable for volatile and oscillating markets to earn steady returns.

It is well known that the principle of trading is to buy low and sell high. By buying an asset when it is undervalued and selling it when it is speculated to be pulled up, you can make a profit on the spread.

Profit = (sell price - buy price) x number of trades

However, many factors influence an asset’s market price, and financial markets frequently go against human nature. When you think the price should be falling, it is rising, and when you think the price should be rising, it first begins to fall. And thus, trading blindly results in no money. If there is no obvious trend market (such as unidirectional up or down) and trading opportunities, you pay the cost of time but gain no return. As a result, it was thought that the one-time buy and sell could be changed to multiple buys and sells. Buy whenever the price falls, and sell as soon as the price begins to rise so that the accumulation of income from continuous trading could be ensured.

In fact, this is the logic of grid trading: first predict where the lowest price of the asset purchased will be if it falls, and what the highest price will be if it rises, and then decide how much money to use for each transaction.

This way, a single buy is divided into multiple buys, and when it falls to a certain level, buy in to amortize the cost; a single selling is divided into multiple sells, and when it rises to a certain level, sell out to profit. Although the number of transactions increases, after matching the transaction records of each buy and sell, you will find that it is still to buy low and sell high to obtain the profit of the spread.

For example, suppose you spend $50 on one cryptocurrency. You have no idea what will happen before you trade, but you plan to buy one more every time it falls $10 and sell one every time it rises $10, stop buying if it falls below $20, and sell all of it when it rises to $60.

Shortly after you buy at $50, the cryptocurrency begins to fall until it reaches $10, then rebounds and begins to rise to $70. You bought 1 at $40, $30, and $20 after the bottom, and sold 1 at $30, $40, $50, and $60 after the bottom, as planned, and we can find the following record of 8 trades:

This is how grid trading works, you don’t buy all in when you enter at $50, you keep a portion of your money to protect against the possibility of a drop and sell when the price rises to lock in your profits. However, due to the lower price limit ($20) and upper price limit ($60) of the trading strategy, you don’t continue to buy when the price drops to $10, and you don’t have any cryptocurrency left to sell when the price rises to $70.

This trading strategy is also known as grid trading because it involves placing buy and sell orders in batches at different price bands, forming a web-like Hi-Lo trading area. Generally speaking, a grid trading strategy can be determined by the following parameters：

1.Price Cap

The upper limit of the grid trading range, when the market price is higher than the price cap, the grid strategy has no assets left to sell.

2.Price Floor

The lower limit of the grid trading range. When the market price is below the lower price limit, the grid strategy has no more cash available for buying.

3.Number of Grids

The percentage of total invested capital per trade also determines how many different price limit orders need to be posted in the grid trading interval. When the number of grids is N, the number of limit orders posted is N-1, and each arbitrage will use 1/N of the total invested capital for the trade.

4.Arithmetic Grid / Geometric Grid

If the price difference between adjacent grids is fixed, it is an Arithmetic Grid, and if the price ratio between adjacent grids is fixed, it’s a Geometric Grid.

5.Total Investment

The amount of money invested in the grid strategy.

What is Unlimited Grid

Grid trading is an interval arbitrage strategy in which the underlying asset’s market price falls within the upper and lower limit price ranges of grid trading, triggering a limit order to sell for profit when it rises and a limit order to buy when it falls.

However, if the price falls below the lower limit of the grid trading price, all funds have been depleted and cannot be used to buy any more; if the price rises above the upper limit of the grid trading price, all assets have been sold and cannot be sold again. Without trading, you cannot continue to arbitrage; this is known as breaking the grid, and it means that the market price of the asset has departed from the price range established by the grid strategy.

The grid strategy is the worst condition because falling below the lower price limit means that all of the invested funds are set. When the price limit is violated, it means that all of the money has been sold and the order is simply tied up, which is not advantageous.

To keep the price from leaving the grid’s trading range, set the lower price limit very low and the upper price limit very high, so that no matter how the market changes, the price will not escape the grid strategy’s grasp. Because both the price ceiling sell order and the price floor buy order fall very far away from the current market price, this type of grid order is also known as a grid world order.

For example, if Bitcoin is currently trading around $20,000, a typical grid strategy might set a price floor of $10,000 and a price ceiling of $40,000, with a 1X upside and downside. However, no one can guarantee that bitcoin’s price will not fall below $10,000 or rise above $40,000 again, so a long-period grid strategy could set the lower price limit at $4,000 and the upper price limit at $100,000, transforming it into a grid moon order that captures any price fluctuations.

But even with the grid, there are still price caps and floors, and if the price of bitcoin breaks $100,000 in a few years, the previously executed grid strategy will be invalid. Therefore, based on the idea of grid trading, a trading method called “Unlimited Grid” was developed, which is a more advanced grid strategy, no matter how much the price rises, you will always hold a portion of the assets to sell for profit, so you can avoid selling when the trend market appears.

The Unlimited Grid strategy only requires setting a price floor, a profit percentage per grid, and a total amount to be invested. Since Unlimited Grid has no price cap, the number of grids is also unlimited and we only know how much up or down we need to execute a buy or sell. In addition, the equilibrium grid does not apply to Unlimited Grid, otherwise when the price is very high, the buy price and sell price will be almost the same, making the grid trading no profit, so Unlimited Grid must be an equilibrium grid.

As for why Unlimited Grid no matter how high the price rises there will never be sold out of the assets? The key lies in the condition of “maintaining a constant asset value”. As the price rises, the amount of money in each transaction will become smaller and smaller, just like the ancient saying “a foot of pound, take half of it every day, the world will not be exhausted”, assuming that for every 10% price increase, sell 10% of the remaining assets, even if the final price rises 10,000 times there will still be a part of the sale because there is no transaction in the process is sold in its entirety.

For example, if we buy 1 bitcoin at $20,000 and set up an Unlimited Grid with a 1% profit margin, when the bitcoin price rises to $20,200, we sell the excess of over 20,000, which is 0.0099 bitcoins for $200, and if it continues to rise, as long as we hold more than $20,200, we sell the excess and only hold $20,000 worth of bitcoins.

What about the case where bitcoin goes down? For example, if the bitcoin price hits $19,800, an additional 0.0101 bitcoins will be purchased, and Unlimited Grid will keep the value of its bitcoin holdings at the initial $20,000, no matter how much the bitcoin price goes up or down. As long as the price fluctuates enough to meet the trading conditions set by Unlimited Grid, it is possible to keep selling high and taking low to take advantage of the profits.

Features of Unlimited Grid

Knowing that Unlimited Grid is a tool that can be used for an unlimited period of time, with no price range, and can help arbitrage forever, isn’t it just like a money printing machine that can always make money? The Unlimited Grid can be used in any market, not just cryptocurrencies, and to earn passive income on investments that have a long-term price increase or relatively stable volatility rather than a downward trend.

However, there are also disadvantages to Unlimited Grid. In the pursuit of a wide range of prices, Unlimited Grid sacrifices a large percentage of capital per trade and keeps a lot of capital in reserve in case of extreme conditions, which makes Unlimited Grid’s capital utilization very low and the profit from each buy low and sell high is quite limited.

For example, for the price fluctuations on the left of the above chart, we can use A, B, C three different price ceilings and price floor set grid strategies.

Strategy A’s price range is the narrowest, hanging limit buy and sell orders just to capture the complete price fluctuations, but if the price goes up a little more or down a little more, it will break the grid out of the trading range.

Strategy B’s price range is larger than A’s, and can completely capture the price fluctuations. But there is a part of the limit buy and sell orders from the beginning to the end when there is no opportunity to fill, only idle hanging in the order book. But this can ensure that the price goes up a little more or down a little more and can continue to arbitrage, not easy to break the net situation.

Strategy C’s price range is even larger than B’s, although the complete capture of the price fluctuations. Most of the limit buy and sell orders from the beginning to the end did not have the opportunity to fill, they are only idle hanging in the order book. The advantage is that this trading strategy can be left almost unattended, look back a few months later at the market price and it still remains within the trading range.

If you think of the three grid strategies A, B, and C as a normal grid trade, a grid order, and an Unlimited Grid, you will quickly see that the biggest difference between them is the percentage of free money. If you put $1,000 into a grid trade, you will find that Strategy A uses almost the entire $1,000 to execute the spread arbitrage, Strategy B actually has only $500 in traded capital, and Strategy C uses about $200 in trades, leaving the remaining $800 in the order book.

We all know that there is no return on idle capital, so if the annual return from price fluctuations for grid trading is 80%, Strategy A would have a full 80% annual return, Strategy B would have 40%, and Strategy C would actually have only 16%. Therefore, it is not necessarily better to have a larger range of prices, but ultimately it depends on the capital utilization and returns to measure the performance, the following is a simple comparison of the differences between the ordinary grid, moon grid, and unlimited grid.

How to use Unlimited Grid on the Gate.io

On Web：

1.Click on “Copy Trading” on the navigation bar and go to “Create A New Strategy” → “Strategies Templates” → (Unlimited Grid)”Create Strategy”. Then choose the trading pair, set up the parameters, and click on “Create”.

2.Select [Trading Market] and set the configuration parameters and click on “Create”, as shown below.

on App:

1.After entering the mobile app, click [Copy Trading] → [Create New Strategy] → [System Recommended Strategy] → [Unlimited Grid] → [Create] in order.

2.Select [Trading Market] and set the configuration parameters, click [Create] to finish, as shown in the figure below.

Configuration parameters description

Lower Price:

The lower limit price is the minimum bid price below which a grid trade will be executed and no further bids will be placed; the lower limit price needs to be > 0.

Profit/grid:

The single-tile yield is the profit margin (including manual fees) after executing a grid sale, and must be > 0.4 and < 100.

Strategy Trigger Price:

Unlimited Grid will start running only when the latest market price is less than or equal to the trigger price, and the trigger price must be < latest price.

Breakout Lower Bound:

The strategy will be automatically terminated when the latest price breaks the grid’s lower limit price.

Stop order:

The strategy will be automatically terminated when the latest price breaks the Stop Loss price.

Conclusion

Unlimited Grid is a type of grid trading, suitable for oscillating markets or slow price uptrends. By setting price ranges and grid yields, you can systematically divide your money into several equal parts. Buy on the downside and sell on the upside, and then sell on the downside to take advantage of the grid in the unpredictable market.

In the year-round and highly volatile cryptocurrency market, trading with the Unlimited Grid avoids human error decisions and helps users to buy low and sell high in a disciplined manner without any emotional or psychological pressure. It will continue to operate as long as the market price remains above the Unlimited Grid’s price floor, so users do not need to pay attention to the market and can use their personal time for other purposes.

As they say, “Trading is not about who makes more money, it’s about who lives longer.” Unlimited Grid is a strategy where your money stays on the table forever, no matter how much the price goes up or down. The longer you stay in the market, the more likely you are to make significant profits with the Unlimited Grid.