Grid Trading Bots: Profit Engines or Empty Promises?
In tandem with the rise of AI, automation has been quick to spread into the realm of trading, what with the rise of a myriad range of trading bots. A while ago, I wrote an article on how grid trading bots may present a novel opportunity to buy cryptocurrencies on a more profitable scale.
Instead of buying cryptocurrencies at one-go, the idea was simple — to use the grid trading bot to spread out the investments over a period of time to DCA into the market, while buying low and selling high.
As promised, this is a follow-up article to explore the profitability of one of my grid trading bots on Binance as an example, and to unravel the truth: do trading bots deserve all the hype they are getting these days after all?
A Brief Technical Analysis of Bitcoin
Trading at $27,000 at the time of writing, Bitcoin is currently facing heaving resistance at the $30,000 level, having failed to break past this critical resistance level numerous times. As a result, for the past 1 month, the market has been consolidating sideways quite a lot in a downward trend, even testing a low of $25,800. Indeed, I could have made profits from all these price fluctuations by actively trading on the market; however, a grid trading bot presented a viable alternative to help me catch these market fluctuations by automating the process of buying low and selling high. If the market dips, I will end up with a greater proportion of cryptocurrencies in my holding, which I am happy to HODL for the next bull run; conversely, if the market booms, I will have a relatively greater proportion of stablecoins ready to buy into the next market dip; rinse and repeat!
My Results After 1 Month
Just to quote one of my many trading bots as an example, I created this grid trading bot on Binance on 21/4/2023 when Bitcoin was trading at $28,000.
Operating on a price range based on critical support ($26,000) and resistance ($31,000) levels, this bot on Binance has been automating trades for me in the past month to return a net profit of $8.3, which is 2.8% of my capital of $298. From the process of buying low and selling high, it has generated a grid profit of $13.79, which helped to negate the negative floating profit of -$5.45 resulting from a depreciation in price of Bitcoin from the time the bot was started. In other words, had I purchased the same amount of Bitcoin as a one-off trade on 21/4/2023 when its price was $28,000, I would have lost -$5.45 in capital based on the current prevailing price of Bitcoin at $27,000. Hence, by trading with a grid trading bot, this capital depreciation has been negated slightly, so that I am still in a net profit. Of course, this is by no means a staggering amount of profit — but it nonetheless presents an enticing window of opportunity as an alternative to a one-off purchase of cryptocurrencies!
Final Thoughts
There are a wide variety of cryptocurrency trading bots in the market that cater to various preferences and risk tolerances; my favourites of which include 3Commas, Pionex, Jet-bot and those built into exchanges such as Binance, Kucoin, Huobi & MEXC — some of which have been highlighted in my earlier article here.
In conclusion, trading bots are a potentially profitable tool to generate a seamless stream of effortless passive income, provided that they are configured and operated properly.
If you are looking for other effortless streams of true passive income, feel free to check out my previous article here!
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