Blockchain Cryptocurrency

Grid Trading – a Strategy to Maximize Returns and Reduce Risk

Grid trading is a strategy used by investors to help maximize their potential returns. While it involves a small risk – all trading does – successful use of the strategy allows traders to lock in profits without having to keep an eagle-eye on the many ups and downs of an asset.

OKEIn order to better help its customers understand the strategy, OKEx has produced a guide on how to use it.

No stranger to helping customers better understand the crypto space, OKEx has previously published details on other trading strategies too, for example calendar spread arbitrage trading, and spot-futures arbitrage.

Explaining the grid trading strategy OKEx, writes: “Grid trading strategy is a technique where a certain number of sell or buy orders are placed at regular intervals above or below a set price to target gains instead of stopping loss. 

“Where a position’s market price meets a predefined target and a gain is recorded upon closing, the same number of buy or sell orders are placed above or below the set price again. This creates a fishing net-like grid of orders for gaining profits back and forth in the fluctuating market.

“Theoretically, grid trading strategy is a sort of absolute return strategy employed by medium-to-low frequency trading investors in arbitrage trading. In a mid-to-long term, the amount you invest is supposed to be risk-free. However, practically, you need to consider the potential risks in doing investment.”

The technique involves comparing positions and basing trades around them. With a little artistic flair traders can create a grid to highlight areas where they need to adapt their position to maximize returns, see the example below.

Remember, even low risk is risky

OKEx is very clear even with low-risk strategies there is a chance you could lose out on your investment. It’s the nature of investing. This can of course be mitigated.

“Trading digital assets always involves some level of risk and can lead to a loss of capital. Ensure you understand the risks involved and seek independent financial advice if necessary,” a spokesperson for the exchange said.

“Always make sure you have a risk management plan in place.”

Malta-based exchange OKEx is one of the world’s largest cryptocurrency exchanges, with customers based across the world. At time of press the exchange was reporting a 24-hour adjusted trading volume of almost $770 million, according to CoinMarketCap.

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