Do Grid Bots work like that?
Let’s use the following abbreviations buy, wait, sell and * for active levels
With () we mark for what levels the wait level has bought assets to sell.
1. Is it like that?
Without trailing and expanding
Start:
b1*, b2*, b3*, w4(5-7), s5*, s6*, s7*
Price goes up:
b1*, b2*, b3*, b4*, b5*, w6(7), s7*
And down:
b1*, b2*, b3*, b4*, w5(6,7), s6*, s7*
b1*, w2(3-7), s3*, s4*, s5*, s6*, s7*
And what happens if it is trailing up?
b3*, b4*, b5*, w6(7-9), s7*, s8*, s9*
And with trailing/expanding down?
b-1*, b0*, b1*, w2(3-5, 6-7), s3*, s4*, s5*
2. Or more like that?
Is it really that the bot buys the assets for s5* to s7* directly at the start? I.e., the take profit of those initial levels would differ?
What about that idea instead:
Start:
b1*, b2*, b3*, w4(5), s5*, s6, s7
Price goes up:
b1*, b2*, b3*, b4*, b5*, w6(5), s7
Description
Level s5 was skipped on the way up. If the price crosses level 6 from above s6 takes profit and buys funds for level 7.
That the initial buy order would only buy the assets for the next sell level and not all sell levels above.
Regarding the last step of my description my idea would currently be to close so much of the position at that the rest has the usual buy order size of a grid level.
That way we had the situation
b1*, b2*, b3*, b4*, b5*, w6(7!), s7*
(Notice the change from w6(5) to w6(7).)
I haven’t checked it in detail yet. It’s only an initial idea. I would have to do the math to check it.
I thought about a similar approach in the context of a DCA grid bot (no, not combo bot), but haven’t finished my thoughts for that neither yet.
A short explanation about above w6(7).
There are different options as always.
Start
b1*, b2*, b3*, w4(5), s5, s6, s7
Cross up 5
b1*, b2*, b3*, b4*, w5(5) or w5(5,6), s6, s7
Cross up 6
b1*, b2*, b3*, b4*, b5*, w6(5) or w6(5-7), s7
Cross down 6
-
Now we could either close the deal for level 5 with the profit for almost two grid levels and e.g. buy assets for level 7.
-
Or if we were using a kind of trailing grid level profit and have bought for level 5 and 6, we could close deals and leave the funds for level 7.
b1*, b2*, b3*, b4*, b5*, w6(7), s7
Above approach wouldn’t allow to place limit sell orders in advance. But grid bots usually place every sell order in the order book before it gets executed.
Therefore, maybe it could it be like that then:
Start:
b1*, b2*, b3*, w4(5), s5*, s6, s7
Price goes up:
b1*, b2*, b3*, b4*, s5* → w5(6), s6*, s7
I.e., s5 gets triggered and closes w4(5) with take profit and buys the assets for s6? If the take profit of that level would be more than the minimum total and if also the lot step would allow to only remove the profit from w4(5) then the initial funds could even remain and we re-use them for w5(6) so that we don’t have to pay fees for selling and directly re-buying those assets. That could continue on the way up.
Example
Buy for $100 at 100 and use 1% geometric spacing.
Sell $10 at 110.00, $100.00 remain
Sell $10 at 121.00, $100.00 remain
Sell $10 at 133.10, $100.00 remain
…
Of course, the amount of shares would reduce (as it would when buying for $100 at upper levels - therefore minimum total and lot step are important).
But what would we do if the price reverses? Do we have to re-add the $10? Well, there seems to be an error in my logic. Would there ever be gains with that? What am I missing currently?
Oh, what I was missing is that we took $10 out of the deal this part wouldn’t lose in value if we drop back to a previous level. I.e., we had to spent less than $10 to fill the gap for the next step up.
Price 133.10 → 121.00 results in deal value $100 → 90.91
So we had to re-buy assets for 9.09.
Buy for $9.09 at 121.00, $100.00 remain
And if the price goes up again:
Sell $10 at 133.10, $100.00 remain
The 10 % take profit in the example was only to make the gains more visible. Of course, one could reduce the distance of the grid levels a little. But to partially close a deal certain gains are required to meet the minimum total and lot step requirements of the exchange.
I would assume, that the grid bot closes the complete deal and re-buys for $100.
Buy for $100 at 100.00 and use 1% geometric spacing.
Sell $110 at 110.00
Buy for $100 at 110.
Sell $110 at 121.00
Buy for $100 at 121.00.
Sell $110 at 133.10
Remark
Those were only theoretical thoughts how a grid strategy could look like. As soon as a bot provider uses exchanges’ native stop-limit orders maybe even the cross-down sell levels could be implemented. Currently I don’t think that it would work without own scripts.