Definition
Grid trading
Grid trading places layered buy and sell orders across a price range. Definition, the per-grid economics, and the trend risk the marketing leaves out.
Grid trading is a market-making style strategy that divides a price range into levels and places buy orders below and sell orders above, capturing the spread each time price oscillates between two levels. It earns small, frequent profits in a ranging market. In a trending market it stops completing pairs and accumulates a directional position instead — the strategy is not broken when that happens, the market regime is.
- Also known as
- grid bot · grid strategy
How it is calculated
Divide a price range into levels; buy each level down, sell each level up.
Spacing % = (Upper − Lower) ÷ (Levels − 1) ÷ Lower × 100
Net / grid = Spacing % − Fee % × 2
Earns spread in a range. Accumulates inventory in a trend.
Worked example: 40 levels across 58,000–72,000 → 0.62% spacing; at 0.02% per side, 0.58% nets per completed grid.
Fees set the floor on spacing
Each completed buy-sell pair pays the trading fee twice, so the gross spread between levels has to exceed twice the fee rate before the grid earns anything. Adding levels feels productive because it produces more trades, but it narrows spacing while the fee stays fixed — past a certain density the strategy trades constantly and nets nothing.
Grid is not martingale
Both add to a position as price falls, which is why they get confused. A grid buys pre-planned, equally sized amounts at levels fixed in advance; martingale increases size after each loss to recover previous losses in one move. The first has a bounded, knowable exposure; the second has exposure that grows without limit.
How it gets misread
Grid bots are frequently marketed on completed-trade counts and win rates, both of which are near-perfect by construction — every completed pair is profitable. The number that decides the outcome is the unrealised inventory when price leaves the range, and it appears in neither statistic.
Sources
- High-frequency trading in a limit order book — Marco Avellaneda and Sasha Stoikov, NYU Courant Institute of Mathematical Sciences
- Dealing with the Inventory Risk. A solution to the market making problem — Olivier Guéant, Charles-Albert Lehalle, Joaquin Fernandez-Tapia (arXiv, Cornell University)
- Introduction to Spot Grid Bot on Bybit — Bybit Help Center
Definitions are educational. Nothing here is investment advice, and no metric described on this page predicts future results.
Definitions are the easy part
Knowing what drawdown means is not the same as having a system that halts on it. QANTERION applies these limits while a strategy runs.