Grid Bot vs DCA Bot

The world of cryptocurrency trading is difficult because it comes with a steep learning curve. You must understand a wide variety of critical concepts before you try your hand at the sector or end up risking a large portion of your value.

You learn about various types of approaches to the market, how much capital you must have to start with and other crucial components that are necessary for you to succeed and grow within your respective trading business.

Once you understand the simple aspects of it and get the hang of speculating manually you can move toward more automated ways to profit on the crypto market.

That is why we will discuss the critical differences between the Grid bot vs DCA bot within this brief guide.

🤷 What is Grid Trading and How Does It Work?

Grid trading will generally utilize automated software processes to attempt to bring about profits. But what is the strategy that you are using with this process?

How does it work?

The approach here is not as simple as you would like it to be for several reasons but let us go through it to find out what it is all about today. The stratagem is most often present within a rather bland and boring market.

That means that you can see many speculators tap into this stratagem when the market is rather sleepy and not moving up or down. If you lack clarity on where the market is moving, you may want to employ this specific option to capture more gains.

People appreciate this particular plan because it helps individuals to gain massive value from the eventual rise and falls present within the specific environment. Remember that you should turn to this strategy when you can’t see what will happen over a longer timeframe.

This approach is more about how the number of times of price variance occurs, and then the variance’s enormity. If these occur regularly, you can notice that it will be a more gainful strategy.

In essence, this type of stratagem revolves around implementing and executing orders to make purchase and divestment orders in a set of values. You would notice that it would form a grid-like pattern while you obtain your value.

The approach derives its nom de guerre from the way that you set up the orders.

But how do you set it up?

The primary step you will take is that of choosing a certain range of asset values that you will target. After you decide this, you will move to the next step. Now, the next step is that you will want to figure out the number of grids you would like to have within your range of values.

What happens here is that you are dividing the range of values into several smaller segments (grids) which will likely elevate the probability of the execution of your inputs.

You should know that the higher the number of grids that you create, the larger the number of trades that will occur within the grid.  That makes sense, right? You are setting up more potential purchases and divestments, and that will likely trigger more transactions. It (the grids) becomes more narrow as you progress (and create more).

But experts warn that the more grid formations that are present within your system, the lower the chances of gaining large profits per execution. But why is that?

With a higher frequency of trade set ups you essentially turn into more of a scalper and enter and exit the markets quickly instead of letting the trade ride for longer.

The shorter the time frame, the less movement there will be within the markets in most cases leading to less larger gains.

You have two choices here, have frequent setups and small gains in between or have more spaced out setups and capture more value to generate more yields.

Grids bot work where you initiate one purchase order, and then a divestment order will also trigger a bit later. The divestment will likely be higher than the acquisition price.

When you conduct a sell action, a buy action will also occur at a lower state than the sale action.

The critical point here is that price must stay within the particular defined set of values, the approach will divest a tad bit when the asset price pushes up but will purchase a bit when the asset price declines. This enables you to obtain gains regardless of the situation, and it is why people appreciate the grid.

But that is not all when it comes to the grid bot, let’s find out more.

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👉 Compelling Reasons to Utilize The Grid Approach

Here are a few of the aspects you should know about the grid plan within your speculative episodes.

It Is a Sustainable Approach to the Digital Asset Market

The approach is not one that is new as it has been around in the speculative industry for a while now. That means that one can rely on it to work in many markets and gain tremendous value.

One can see a plethora of speculators who have turned to this approach and found many wins with it. They have turned to it time and time again over the course of 30 years or more to generate alpha in their portfolios.

The cryptocurrency market is known for its wild swings from highs to lows, it is a vivacious and very moody market that can present fantastic opportunities. It is one market that can be quite conducive to this particular plan of attack.

It Is not Complex

Speculators appreciate Grid bot approach because it is not very complex. The idea is to stagger out your acquisitions and your sales so that you can participate in the market comprehensively.

It will not ask you to learn about a series of steps or computer process instructions when automating this strategy. The plan does not ask people to learn about signals or other chart patterns you may have to learn elsewhere.

The plan only asks you to implement this process where you strategically place buys and sales within a grid-like fashion. You can understand the basics of the concept without relying on many formulas, numbers, or chart patterns, which is why people appreciate it.

The beauty of this strategy is that those who are new to the world of speculation and those that have been in it for a while can both easily implement it without confusion.

Flexibility

The idea derives from simple common sense investing as you want to purchase assets at a reasonable low price and then divest them at a higher price. If you are able to implement this successfully, then you can increase the value of your portfolio.

That is why it is not merely relevant in the digital asset markets but in other financial markets as well. It is trend agnostic and even indifferent to behavior.

You are able to have some level of control within this market by defining certain ranges and implementing these matrices. It is up to you to note the number of frameworks and the time horizon.

Speculators appreciate Grid strategy because it tends to yield phenomenal results in the near term and over a longer time horizon. Indeed, you can conduct over several two hundred transactions to capture tiny profits within a given timeframe or be more patient and conduct swing trading with this approach.

Those who want to aim for longer ranges will usually have a setup that will last for several months to gain from these transactions.

Inputting Liquidity

Did you know that market makers will turn to this approach for their provision of liquidity? The technique is known to help input liquidity into the market.

But why is this so?

The answer is quite simple; it is so because of those who continue to come back and participate in the market. Remember that those who employ this process will go and purchase and sell frequently or slowly over the long-term. That means that there is someone who is participating in the markets no matter what.

Now, where liquidity is, you will also find a significant amount of volume to keep activity flowing.

Speculators who use this approach will not realize one simple aspect of this technique is that it could be very pertinent in the markets without the necessary liquidity. Narrow order books are not appealing in many markets because it means that people can not get in and get out of the markets with ease.

But why are illiquid markets attractive and in harmony with this approach?

Narrow order books and minimal volume within a specific market can lead to large increases with a tad bit of investment. That is why you can notice that random coins and markets can have 20% of 50% jumps, with only a little bit of action.

You can gain from these small spikes and slowly stabilize the market by employing the framework automation that we are discussing within this piece. As you participate, you improve the quality of the market, help the facilitator like Binance, and provide reasonable prices.

Mitigate Risks

The overall framework that you decide will be important when utilizing Grid bot technique and will enable you to capitalize on the right upsides while minimizing your downsides.

If you are conducting it correctly, you will notice that your risks are at a lower level or at least match the expected rewards within this process. The automation that you employ will go and slowly earn slight gains while you refine the system to improve your results.

It is a good idea to learn how to get closer and closer to minimal risks as you take these actions so that you have little stress while earning.

Conversely, you can also use this strategy to bet big and ideally earn larger yields for the level of risk you take on. Remember that you can dabble in more risky markets like those coins with lower market caps to see potential spikes that increase your portfolio value if you exit quickly.

Further, you can seize opportunity with the right portion of leverage on specific entities like Pionex. If you have a desire to increase your profit and loss via leverage, remember to stay careful and diligent but to use the appropriate portion of margin.

What’s beautiful about specific automatons is that they can enable you to refine the level of risk you decide to take on as you invest in and allocate funds to brand-name digital assets such as bitcoin.

Sideways Environments are Fine

But the truth is that markets are not always transparent. In fact, it is usually opaque and hard to read. That is what makes it fun but also quite perplexing.

Individuals want to make sure that they are speculating in the right pattern but will have to sit it out if they chose the wrong trend. What if they bet in the wrong direction? They could lose quite a bit of money.

But if they go with this framework approach, then they can realize gains even if there’s flat markets.

This framework approach is not about waiting for specific times to enter the market as you seek to think about the trends and patterns to gain value. No, it is more about moving with the market. For instance, if bitcoin descends from a price level, you can purchase it at a lower price if you employ this approach.

Then when it ascends, you will sell it and book a gain.

But suppose it continues to move in a flat manner with minimal upward movement. In that case, you are still purchasing and divesting within a specific range, so you can still gain regardless of the situation.

While other techniques are about precise movements and allocations, this one is more about adapting to the environment and gaining small portions of value throughout.

With this, you are regularly purchasing and selling so that you can stay flexible and minimize losses. But it is important to remember that this is all about the range that you set so that you can succeed.

So the activity must stay within your predefined values for it to continue to be active.

Of course, this also resembles the general DCA strategy where you are buying throughout all times so that you average through the swings up and the swings down. The primary difference here is that you are divesting within a predefined set as opposed to merely buying across periods.

Place a Wide Variety of Bets

This framework enables you to allocate capital to a few more assets in this manner while holding prominent assets for the long-term. This diversification will provide a general sense of security while you capture small returns in the present by moving in and out of the market.

Traders Appreciate Streamlined Frameworks

Speculators like this framework because it has simple logic and stands regardless of market conditions. You input your buys and sells within this matrix framework and you will employ it without worrying about what the market is doing.

That is why many speculators will employ bots to conduct this strategy and improve their lives. It brings about efficiency, effectiveness, and emotionless trading.

The next critical component that makes it appealing for automation is digital asset markets run regularly and do not take breaks.

⚠️ What Are the Risks Present within Grid Approach?

As with any strategy, you will take on a bit of risk while you pursue profits. Of course, it isn’t easy to achieve gains and that is why you must be aware of the risks present with this particular framework.

Indeed, it is one of the more approaches that have less risk, but it is still not risk-free.

The first one is that if the price descends and stays at a really low level, you will not generate gains. There has to be some sort of life where the asset is able to go back up at times. As such, you should want to use this when the market will bounce back up.

The risk is that you do not have the right stop-limit orders present so as to protect your assets in the event of a deep fall. These are a crucial part of the process and proper framework strategy.

It is crucial to remember that when you automate such a framework, you are the brains behind the operation, and it is up to you to watch and place the right inputs into the system. Pay attention to the trigger point, the stop limit, and profit maximization components.

You must make certain to allocate the money you are comfortable with parting with when employing this approach. Start with a small portion of capital before you start expanding it.

You will know that you are cut out for this strategy if you can continue to increase your small portion of funds.

Lastly, remember that it would be best if you would think about broker commissions when employing this strategy as you may trade frequently. Work with entities that offer discounts or value back when you participate in the market as a contributor. The better you are able to control and minimize expenses, the smarter and more successful you will be.

The next aspect you must pay attention to is that the present environment and the types of pairs that are present within the market. View the patterns, and have general knowledge of how the market is acting so you can position your defined range accordingly.

The main thing you are looking for are charts that are not nosediving but are rather going up and moving in a sideways pattern.

🤷‍♂️ What is DCA Trading and How Does It Work?

Dollar-Cost Averaging is a trading method that speculators use to minimize their risk and purchase assets in certain currency increments per period. For instance, one can allocate $100 per month or $1000 per month to a basket of cryptocurrency assets, thereby purchasing a certain amount of units at fluctuating prices but per month. That means that the individual will purchase $100 or $X worth of assets per time frame no matter what happens.

The reason why this is important is that if one is interested in the asset over the long-term, this strategy plays out quite well. For instance, if you liked bitcoin in January 2017 and started allocating $1,000 per month in January 2017, you would continue to do so even if bitcoin’s price went from $1000 to $20,000.

Why?

You are interested in averaging out your purchases. In January 2018, bitcoin would start to correct, and you would buy the same amount all the way down.

Then you would continue to buy the same amount on the way up.

For you and other dollar-cost averaging, the price doesn’t matter; the amount of money you allocate per month stays the same; no matter what happens, you sleep soundly knowing you are in it for a while and will continue to stack satoshis.

Experts note that this method derives from the Martingale concept that is present in the world of betting. The bettor would use the Martingale concept to continue to dig their way out of a heavy loss.

How?

The bettor would console themselves by thinking that luck would turn around and all that he must do is merely continue to bet with the same increments of money as opposed to betting bigger or smaller.

The idea in the markets or the financial arena is that the digital asset price will go higher over time and that patience and continual investment is quite necessary. If one were to allocate capital all throughout the peak and the trough periods, one could realize an average purchase price that is feasible.

But there is a side note that will go with this particular option, remember that you must go and continue to generate profits elsewhere to have more capital to spend.

If you do not have large pockets, you may realize this pocket will not work as well for you. Remember that you are not looking for a quick realization of gains but rather slow and steady accumulation that should do well in your favor as the asset price will most certainly rise.

The critical point here is that you want to minimize the cost of the asset purchase over time. The digital asset may be $1000 one month and then $800 the next month, falling to $700 and $500 over the next few months, and so your average price would be great if you averaged over time.

If you purchased it all at one time, it would not be as great, for instance, if you purchased bitcoin at $1,000 and spent all your money, you would not have money to purchase on the dips.

You have several choices with the DCA option. You can either conduct it manually or you can conduct it automatically with these automated bot machines.

It is better to do DCA automatically as it lets you not have to worry about manually implementing this strategy. Further, this may seem as if it is the ultimate form of passive investing. But always be aware that you are investing in a rising market, as passively investing in a long-term downward trending market does not make sense.

The simple concept here is to implement the practice of purchasing btc at same time frequencies to minimize your overall risk. You don’t step into the market and spend $10,000 or all of your money at once.

No, what you do is go ahead and purchase a bit over time so you can accumulate and have minimal worries. It is best to do so as it requires minimal thinking and enables you to participate for a while.

Did you know that this strategy enables you to be an efficient day trader too? The simple idea is to set an initial threshold price that you purchase at, and then you will buy when the asset dips.

Take profit will follow the overall average of the price. It is likely that the asset will move to your initial point and then move upward. Speculators will ensure to input setting to where they can stay nimble throughout each market environment.

For instance, let us say that you buy $80 per unit. The take profit level is at 30%. That means you are taking profit at $104. Prices within the asset fluctuate between $80, $95, $91, $75, $82 and then go to $95.

It may never get to the exact price, but you know for sure that you will be able to take profit because of the price dips.

Different brands will enable you to conduct manual DCA orders with their bots in addition to the automatic purchases. They will provide settings where you can notice the history of the asset price and the overall position.

Experts also suggest that you set up your machine to where it will DCA when you tell it to. For instance, make sure to instruct it on when to make the purchase and the frequency of the purchase.

Speculators appreciate this method because it is very hands-off, and it makes to where emotions are taken out of the picture. The individual is systematically buying instead of opportunistically purchasing assets.

You will have charted a path, and you will have stuck to that specific asset purchase path. Regardless of the wild nature of the asset, the price movement will not bother you as much.

If the price declines, you will have no fear and will continue to purchase the same amount as you look toward the future.

Pros

The beauty of this particular strategy is that it enables you to minimize timing issues as you spend time in the market. You will not run into problems where you purchase at the peak and have little capital left to invest.

Many people are still seeking to recover from the btc crash in 2018.

Cons

The problem with dollar-cost averaging is if the price continues to rise without any corrections. Sure, the revisions will likely come, but it is important to watch and understand the market and what level it is at the moment. Is it an extremely bullish market?

You do not want to catch yourself dollar cost averaging in a crazy bullish market.

Don’t be Too Passive

You don’t want to dollar cost average into a random coin like Kim Jong Un coin. It is best to DCA into a prime asset like bitcoin.

You must always make sure to conduct thorough research before implementing this particular strategy. If you are able to make sure to catch a prime asset as it is fighting its way up, like BTC or ETH when it is down and in a tough market, you are likely to do well with DCA.

The main point is that you must ensure to have the right asset will bounce up and stay up but will also struggle in the medium term, going up and down.

That is why experts will note that it is best to make sure that you are identifying great assets that have a battle between bulls and bears.

The battle between the bulls and bears is where DCA comes into play quite well. For if they are fighting, the price will go up and then decline and maybe decline some more and then eventually come up.

The DCA bot is great in many markets and should certainly be in use at most times except in extremely bullish situations.

That is the major differences between the two, have fun trading and good luck!