Grid Trading 101: How to Set Reasonable Grid Parameters?

Grid trading is one of the most commonly used strategies in quantitative trading, particularly suitable for sideways markets.

Grid trading involves setting multiple buy and sell price levels within a certain price range. When the price drops to a certain grid, a buy order is executed; when it rises to a certain grid, a sell order is executed, profiting from the price differences through buying low and selling high.

1. Price Range: Determine the upper and lower limits based on historical volatility, typically selecting recent support and resistance levels.
2. Number of Grids: The denser the grids, the more frequent the trades, but the profit per trade will be smaller.
3. Investment per Grid: It is recommended to allocate 5-10% of total funds to each grid to avoid liquidation in a one-sided market.
4. Stop-Loss Level: Set 10-15% below the lower limit of the range to prevent extreme market conditions.

• Sideways market ✅
• One-sided upward market ⚠️ (risk of missing out)
• One-sided downward market ❌ (risk of being trapped)

If anyone has experience with grid trading, feel free to share!