How to Trade Effectively With a Grid Bot

A grid bot is an advanced tool for automated trading that capitalizes on market price fluctuations. For many beginners, temporary losses and dips in profitability can be daunting, often leading to premature bot shutdowns. Understanding that these drawdowns are a normal part of the bot’s operation is key to successful trading. Here’s how to manage your grid bot effectively and make the most of its capabilities.

Understanding Temporary Drawdowns

When the market price of an asset drops, your grid bot buys more of the asset at these lower prices, which can lead to temporary negative PNL (Profit and Loss) and ROI (Return on Investment). This isn’t a failure of strategy but rather a standard phase where the bot accumulates a position to sell at higher prices when the market rebounds. The bot’s strategy of “buy low, sell high” means that it is preparing to profit when the market turns around.

Benefits of Using a Grid Bot

• Buy Low, Sell High: The bot automatically buys assets at lower prices and sells them at higher ones, benefiting from market swings.

• 24/7 Operation: It continuously monitors the market and executes trades around the clock, which is crucial in volatile conditions.

• Averages Positions: By purchasing more assets at lower prices during a price drop, the bot reduces the average cost of the position.

• Gradual Selling: It sells assets gradually as prices increase, without waiting for the grid to complete.

• Trailing Function: The bot can adjust its grid range as prices rise, ensuring it captures new trading opportunities and maximizes profits.

• Miss No Opportunity: It’s always active, preventing missed chances during sharp price increases (pumps)

As shown in the 1st chart, if the bot had been launched when the price was 8.61% higher than the current price, it would have reduced the average purchase price (break-even point) to just 1.43% above the current price. This adjustment means the bot has cut potential losses by 7.18% compared to a standard asset purchase.

And in the 2nd chart, you can see that the current price hasn’t even caught up with the bot’s opening price, yet the trader is already in profit.

Managing and Restarting Your Bot

In cases where the asset price drops significantly and the bot accumulates a large position, the number of sell orders surpasses the number of buy orders. In such scenarios, it may be prudent to close and restart the bot with adjusted settings, such as fewer sell orders.

Important: Only restart the bot when ROI and PNL are positive. Restarting with negative values will lock in your losses. Ensure the current position is profitable before making adjustments to minimize risks.

Conclusion

A grid bot is a powerful and effective trading tool that needs time to execute its strategy. Don’t be alarmed by temporary drawdowns. With proper management and strategic restarts, your grid bot will help you navigate market fluctuations, operate continuously, average positions, and capitalize on rising markets. Embrace the learning curve, and let the bot work to your advantage.

This information does not constitute financial advice or recommendation. Remember that trading involves risks.

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3Commas HODL DCA bot strategy

How it works

This strategy is designed for long-term investments. It follows the conventional DCA (Dollar Cost Averaging) investment strategy.

The strategy is to keep buying equal shares of an asset at regular intervals, regardless of the asset's current price.

Investing this way does not require a big sum as a one-time payment, and an increase in the value of an asset will bring profit over time.

How to set up

1. Create 3Commas HODL DCA BOT for your preferred exchange and trading pair:

1. Disable safety orders (set safety orders count to 0).

2. Disable Take profit (Set a 999% Take Profit and activate Trailing Take Profit).

3. Manually initiate the first trade.

4. Copy the "Message for deal add funds signal" from your bot's page.

2. Link the HODL DCA Strategy to your DCA bot via webhook signal:

1. Open your Tradingview account.

2. Find this private strategy link https://www.tradingview.com/script/NDNNTmd0-3Commas-HODL-DCA-Strategy/

3. Add the script to your favourite indicators.

4. Open chart of desired trading pair and apply the strategy indicator.

5. Set the Start date and Finish date for strategy trading — the strategy will buy on every bar close after Start date.

6. The chart's timeframe will control the frequency of purchases. For instance, on the daily timeframe, the bot will buy every day, while on the weekly timeframe, it will buy every week.
   

3. Set up an alert on Tradngview website:

1. Press the create alert button

2. Switch alert condition to 3Commas HODL DCA.

3. Paste your "Message for deal add funds signal" into the alert message field.

4. Specify the amount coins of quoe or base (depending on selected message type) directly in the message by editing volume parameter "volume": 10

5. Insert 3Commas webhook address https://3commas.io/trade_signal/trading_view Please note that this link wont open in any browser, only Tradingview server able to reach it.

Please note that in this article I describe integration only for add funds signal and leaving the option to exit your strategy by manually closing your DCA bot deal. If you want to exit your strategy on Finish date then you will need to set up another alert for “Message to close all deals at Market Price and stop bot”

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3Commas DCA (Martingale) bot calculator

Dollar Cost Averaging (DCA) is a strategy where a trader splits their total investment into smaller, regular purchases of an asset to minimize the effects of market volatility.

The key feature of 3Commas is its trading bots, which are called DCA bots, but in reality, they use a martingale strategy.

I created a Safety Orders Calculator in Google Sheets to help you determine how safe your bot settings are and how much funds are needed for each averaging safety trade in 3Commas:

https://docs.google.com/spreadsheets/d/1aGaxRrLr3Bf8hjOwpR1YufE810VchQ1VEN4eL4fT0hk/edit?usp=sharing

Simply enter your desired bot settings by replacing the numbers in the orange fields of the table, and the calculator will automatically provide all the important data for you.

When the calculated Safety Factor shows a score of "2," it means the price only needs to recover halfway from your initial order to reach the Take Profit for that trade. An average Safety Factor with a score of "2" or higher is a strong indicator of good settings.

If you see negative numbers or "DIV," it means your settings violate mathematical rules— for example, you cannot lose more than 100% of a long position in the same trade, so the maximum deviation is 100%.

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