The team at global crypto exchange OKEx is continuing its work to educate investors and traders about the different strategies they can use to generate returns.
In its latest update OKEx is focusing on the potential benefits of a grid trading strategy. Grid trading works by focusing your trades around positions as opposed to the timings of trades.
Explaining the strategy in its post OKEx, said: “Basically, the 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.”
How is it done?
In its post, OKEx sets out an example of a medium to low frequency grid trading strategy in action.
Looking at the BTC Swap and BTC Quarterly contracts the difference between the two is calculated as the price of the former minus the price of the latter.
In the above example you can see the steps to take to use the grid trading strategy.
OKEx explains the process of setting up a grid trade:
“We place a long order once the market price moves one interval lower. When the market price falls, we open 3 long positions at Buy 1, Buy 2 and Buy 3 in order (i.e. Buy 1, Buy 2 and Buy 3 shown above, representing the opening of 30 long perpetual contracts and 30 short quarterly contracts); and when the market price rebounds, we cover positions at Cover 3, Cover 2 and Cover 1.”
OKEx says once this is done you would calculate profit as three times one interval.
More to learn
OKEx is one of the world’s leading cryptocurrency and digital asset exchange platforms.
Originally set up in Hong Kong in 2014, the business now operates out of ‘blockchain island’ Malta. The exchange regularly reports daily trading volume in the hundreds of millions of dollars and is the chosen platform for new and experienced traders alike.