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Futures grid trading bots: A beginner’s guide

By Kraken Learn team
7 min
14 окт. 2024 г.
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A beginner's guide to algorithmic futures trading ⚙️

  • Futures grid trading bots automate buy and sell orders across preset price levels, benefiting from market fluctuations without manual intervention.

  • These bots enhance trading efficiency by executing trades 24/7, using predefined strategies and technical indicators to capitalize on short-term price movements.

  • Key features include real-time monitoring, custom strategies, risk management tools like stop-loss orders and seamless integration with cryptocurrency exchanges.

A futures grid trading bot is an automated tool designed for the futures market.

Grid bots typically place long (buy) and short (sell) orders at preset intervals above and below the current contract price, creating a pattern that looks like a grid (hence the name). This approach allows traders to benefit from choppy market fluctuations without needing to watch the market constantly.

Grid bots are automatic and execute trades based on predefined rules. With the right timing, they can be deployed to take advantage of range-bound price action. 

Traders generally use futures grid bots to capture the best average buy and sell prices by placing trades across a grid of price levels. Instead of chasing maximum profits, it focuses on consistently taking advantage of small market movements. This creates a steady and systematic approach to futures trading by using automation to manage these shifts efficiently.

Importance of algorithmic trading in the crypto market 💻

Algorithmic trading, particularly through trading bots, has become pivotal in cryptocurrency markets due to its rapid trade execution.

Grid bots in particular, excel at seizing short-term market movements and arbitrage opportunities, which are often challenging for humans to identify and act upon in real-time. For example, they operate 24/7 without emotions or time constraints. They can also analyze large data sets and execute trades accordingly, leveraging fleeting trends or exploiting price differences across various exchanges.

Moreover, these bots contribute significantly to market liquidity by maintaining a continuous flow of trades. They can swiftly identify and capitalize on price disparities between exchanges, reducing market inefficiencies and fostering a more synchronized market environment.

Key features of futures grid trading bots 🤖

Futures grid trading bots boast several useful characteristics that prospective crypto futures traders might find appealing, when compared to other trading options.

Automated trading and trade execution

Automated trading allows for the execution of trades at high speeds, improving efficiency and reducing the likelihood of human error. Trade execution using bots can help traders capitalize on short-lived opportunities and arbitrage situations that may be difficult for humans to act upon in real-time.

Trading strategies and custom strategies

Some advanced trading bots offer a variety of pre-built strategies, enabling traders to select the best approach based on their risk tolerance, market conditions, and trading goals. Custom strategies allow traders to tailor their trading approach, incorporating unique insights and techniques to optimize their trading performance.

Technical indicators and trading signals

Trading bots can utilize various technical indicators, such as moving averages and RSI, to identify potential entry and exit points for trades. Bots generate trading signals based on these indicators, enabling traders to make informed decisions and capitalize on market trends.

Real-time monitoring and performance metrics

Bots can provide real-time monitoring of trades and market conditions, allowing traders to make adjustments as needed to optimize their strategies. Available performance metrics may also enable traders to better evaluate the effectiveness of their trading strategies and bots, making it easier to identify areas for improvement.

Optimization and backtesting

Some crypto trading bots offer optimization features, allowing traders to fine-tune their strategies based on historical and current market data. Backtesting allows traders to test their strategies against historical data, providing insights into the past performance and effectiveness of the trading bot before implementing it.
 

Integration with cryptocurrency exchanges and exchange APIs

Many trading bots can seamlessly integrate with various cryptocurrency exchanges, providing traders with access to a wide range of trading pairs and liquidity. Exchange APIs often enable bots to execute trades directly on the platform, ensuring efficient and accurate trade execution without the need for manual intervention.

black swan event crypto

Benefits of using futures grid trading bots 🏆

The removal of human emotions and the enhanced speed of trade execution makes these types of crypto trading bots popular among new and experienced traders.

Broadly speaking, there are four main benefits of using futures grid trading bots:

Improved trading efficiency and reduced human error

Trading bots can execute trades at high speeds and with precision, minimizing the likelihood of costly mistakes that can occur due to human emotions, fatigue, or manual trading errors.

Enhanced risk management

Bots can implement risk management techniques, such as stop-loss and take-profit orders, to protect traders from significant losses. Automated trading systems may help manage financial risk by diversifying trades across various assets, reducing the impact of market volatility on a trader's portfolio.

Simplified trading experience for novice traders

Trading bots simplify the trading process by automating complex tasks.

Execute trades 24/7

By automating trades and capitalizing on market opportunities 24/7, trading bots may generate profits for traders even when they are not actively monitoring the markets.

Effective management of positions and portfolio

Trading bots can help traders manage their positions and portfolios by diversifying assets, setting stop-loss and take-profit orders, and monitoring performance metrics, ensuring a more balanced and risk-adjusted approach to trading.

Image of a line chart and a candlestick chart

Popular futures trading grid bots techniques 📊

Grid configuration

It's important for derivatives traders to carefully consider what price levels and trade allocations to employ when configuring this automated trading strategy.

Some traders find it useful to identify the range within a sideways price action by creating a parallel channel using the highest high and lowest low. Depending on preference, the granularity of the grid can be altered to capture smaller price movements, or larger swings.

This configuration enables traders to capitalize on market fluctuations by automatically executing trades when the market reaches these specific price levels.

Dynamic grid adjustments

Some advanced grid bots can dynamically adjust the grid according to market conditions, narrowing or widening the intervals between orders to optimize trading performance based on market volatility, increased trading volume and other trends.

This may result in increased cryptocurrency trading profitability if volatility increases and more positions are triggered and successfully closed.

Stop-loss and take-profit orders

To manage risk effectively, grid bots can incorporate stop-loss and take-profit orders into their strategies.

These orders automatically close positions when specific price levels are reached, protecting traders from significant losses and locking in profits.

For more information on these types of trade orders, visit our Learn Center guide, "What are trade orders?".

Image of a line chart and a candlestick chart

4 popular futures grid trading bots in 2024 📋

For more information on how to connect your Kraken Pro account to external services, visit our Kraken Futures API Support Center article.

Get started with kraken

If you feel ready to start your crypto futures trading journey, look no further than Kraken Pro. 

It’s your one-stop destination for advanced crypto trading, with a fully customizable interface and access to over 210+ cryptocurrency markets.

 

Disclaimer

These materials are for general information purposes only and are not investment advice or a recommendation or solicitation to buy, sell, stake, or hold any cryptoasset or to engage in any specific trading strategy. Kraken makes no representation or warranty of any kind, express or implied, as to the accuracy, completeness, timeliness, suitability or validity of any such information and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. Kraken does not and will not work to increase or decrease the price of any particular cryptoasset it makes available. Some crypto products and markets are unregulated, and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of the cryptoasset markets can lead to loss of funds. Tax may be payable on any return and/or on any increase in the value of your cryptoassets and you should seek independent advice on your taxation position. Geographic restrictions may apply.

Trading futures, derivatives and other instruments using leverage involves an element of risk and may not be suitable for everyone. Read to learn more