[00:00] Welcome to the Trading With A Bot channel.&nbsp; Here on the screen I have a Grid Trading&nbsp;&nbsp; Strategy for IOST and Tether crypto pair,&nbsp; trading it on the Binance Futures platform.&nbsp;&nbsp;
[00:12] I had covered Grid Trading in my other videos&nbsp; of the Bitsgap platform. Binance Futures Grid&nbsp;&nbsp; Trading, however, is very different. What you see&nbsp; on the screen now is the grid setup for IOST_USDT&nbsp;&nbsp;
[00:28] crypto pair. In this video I will show you the&nbsp; loss and the profit I had made with this pair,&nbsp;&nbsp; how to set up Grid Trading and most importantly,&nbsp; how to manage your risks in order for you&nbsp;&nbsp; to avoid losing your money. Unlike with&nbsp; the regular Spot trading, where you buy,&nbsp;&nbsp;
[00:43] hold and sell crypto tokens, in Futures&nbsp; trading you are buying and selling contracts.&nbsp;&nbsp; Note that I am trading Perpetual Future contracts.&nbsp; A traditional financial instrument such as Futures&nbsp;&nbsp; or Options contract will have an expiration date,&nbsp; but the Perpetual contracts will continue to stay&nbsp;&nbsp;
[01:00] valid indefinitely. If you are not familiar&nbsp; with these concepts, I left a link below&nbsp;&nbsp; in the description for you to learn the basics.&nbsp; Before I go into the details of this Grid Trading&nbsp;&nbsp; setup and my approach to Grid Trading, I&nbsp; want to show you the results I achieve.
[01:19] What you see now on a screen is that&nbsp; trading this pair is producing a loss.&nbsp;&nbsp; I purchased 5 Buy/Long positions as the price&nbsp; went down and they are now waiting to be&nbsp;&nbsp;
[01:31] closed when the price will go back up. This had&nbsp; happened within less than a day - all Sell/Short&nbsp;&nbsp; orders were closed and the strategy&nbsp; had a realized gain of over 100%.
[01:46] As I close this set up manually at the market&nbsp; price, you will see that my final realized profit&nbsp;&nbsp; was 128%. I had achieved it with an initial&nbsp; investment of $5.20 within 2.5 days. And now&nbsp;&nbsp;
[02:00] I will go step-by-step and explain how I set&nbsp; up my grids to avoid buying Short positions&nbsp;&nbsp; and how I measure my risks to avoid my positions&nbsp; being liquidated and losing all my money.
[02:12] I have a very simple approach to Grid Trading on&nbsp; Binance Futures. It consists of 3 steps: #1 - I&nbsp;&nbsp; always choose Perpetual contracts. When trading&nbsp; Futures, you are not buying and holding tokens,&nbsp;&nbsp;
[02:26] but instead you're buying a contract of the&nbsp; token's future price. You either think the&nbsp;&nbsp; price will go up and you open a Buy/Long position&nbsp; or you anticipate that the price will go down&nbsp;&nbsp; and you open a Sell/Short position. If the&nbsp; price goes into the direction you predict,&nbsp;&nbsp;
[02:40] you are making money. Perpetual&nbsp; Futures contracts do not expire,&nbsp;&nbsp; so it does not matter when the price goes up&nbsp; or down, as long as it eventually gets to your&nbsp;&nbsp; Long or Short position and this position&nbsp; is closed and the gains are realized.
[02:57] This is the second key element of&nbsp; my strategy. When I set up my grids&nbsp;&nbsp; I always make sure that my upper limit is right&nbsp; below the edge of the Current Price level.
[03:11] I will show you this with an example in a moment.&nbsp;&nbsp; The reason for this approach is simple - if&nbsp; you open a Sell/Short position, it may never&nbsp;&nbsp; get closed if the price continues to go up&nbsp; and up and your losses may be extremely high.
[03:34] And the #3 and equally important rule: You need&nbsp; to calculate and ensure sufficient balance in&nbsp;&nbsp; your Futures wallet that you set aside and hold&nbsp; as collateral. If your Long or Short positions&nbsp;&nbsp; will start losing value, your collateral&nbsp; balance will be held hostage. If the wallet&nbsp;&nbsp;
[03:49] is sufficiently big you simply maintain&nbsp; these positions until they become winning,&nbsp;&nbsp; but if your (maintenance) balance is not&nbsp; sufficient everything will be liquidated, your&nbsp;&nbsp; positions will be terminated and your collateral&nbsp; wallet will be emptied. You will lose everything.
[04:05] Let me continue to illustrate point #2 two and&nbsp; #3 with examples and some additional details. Within the Grid Setup form you will see the Last&nbsp; Price at which the crypto pairs Futures contract&nbsp;&nbsp;
[04:20] is trading. When you create your grid, your&nbsp; upper price should be right on the edge and&nbsp;&nbsp; slightly below the value of the Last Price. The&nbsp; market's Last Price value will jump up and down&nbsp;&nbsp; every second, so once you create your grid, verify&nbsp; that you have not opened any Sell/Short positions.&nbsp;&nbsp;
[04:36] Here as I go into my Active Grid panel&nbsp; and view the grid that I had just created,&nbsp;&nbsp; I am making sure that I only&nbsp; have Buy/Long positions opened. Sometimes the first Buy will be executed&nbsp; immediately, if the price is fluctuating&nbsp;&nbsp;
[04:51] up and down, and sometimes you will need to&nbsp; recreate your grid with a higher upper limit&nbsp;&nbsp; to trigger the first Buy. The main assumption&nbsp; of this strategy is that the market is bullish&nbsp;&nbsp; and that the price will go slightly down,&nbsp; allowing you to open Buy/Long positions,&nbsp;&nbsp;
[05:07] but then eventually go back up allowing you to&nbsp; close all of your open positions with a profit. Remember, if accidentally you&nbsp; first open a Sell/Short position&nbsp;&nbsp; so terminate your grid manually if your first&nbsp; position is a Sell and create a new one again.
[05:33] Watch me here repeating the operations&nbsp; of opening a grid and adjusting the Upper&nbsp;&nbsp; Grid Price several times to make sure&nbsp; that I stay right below the Last Price.&nbsp;&nbsp;
[05:52] Grid is opened and I go to verify if I&nbsp; did not accidentally started with a Sell. so now when the price goes down I&nbsp; will be opening these Buy(s)/Long(s),&nbsp;&nbsp;
[06:08] and when the price goes back up and reaches&nbsp; the grid again, I will be closing them.
[06:24] Now the grid is activated, the price is going&nbsp; down and my Long positions are being opened.&nbsp;&nbsp; This is exactly what I want.
[06:38] You can see that my PnL is negative and&nbsp; will continue to be negative until the&nbsp;&nbsp; price will go back up. Here you just sit back&nbsp; and watch the grid framework to automatically&nbsp;&nbsp; perform Buys and Sells. What you need to make&nbsp; sure of, however, is that you have enough&nbsp;&nbsp;
[06:52] collateral balance to avoid a liquidation&nbsp; if the price will continue to go down.&nbsp;&nbsp; How much collateral balance should you hold?&nbsp; More than you think. Let me illustrate this&nbsp;&nbsp; with the last part of this video and the last&nbsp; rule of my strategy: "Maintain a sufficient&nbsp;&nbsp;
[07:07] account balance to avoid liquidation,&nbsp; even if the price drops down to zero."&nbsp;&nbsp; The Grid Strategy that I had set&nbsp; up earlier had 15 grids in total.
[07:19] I will now perform a manual calculation of&nbsp; how much collateral amount I need to hold in&nbsp;&nbsp; my balance, in case the price will continue to&nbsp; drop and all of my 15 grids will be opened with&nbsp;&nbsp; a Buy/Long position. I'll do it in Excel, just&nbsp; to illustrate a point. First, I'll add the price&nbsp;&nbsp;
[07:36] levels for each grid. The quantity is the same for&nbsp; each grid, I am buying 524 IOST tokens per grid&nbsp;&nbsp; with the setup I had chosen. Remember, I had&nbsp; invested 5.2 USDT for this grid strategy in total.&nbsp;&nbsp;
[07:51] Now, let's calculate what happens if the price&nbsp; continues to go down and I continue to open&nbsp;&nbsp; Buy/Long positions. I want to see how much balance&nbsp; I need to hold in my Futures account if the price&nbsp;&nbsp; will drop to zero. This is absolutely the worst&nbsp; case scenario - if this happens and if i am able&nbsp;&nbsp;
[08:07] to withstand it, I will not be liquidated and&nbsp; will enjoy a profit when the price recovers. amount for each grid position for the&nbsp; cases when the price drops to zero.
[08:28] In the calculator I am simply reflecting my setup:&nbsp; the 50x leverage that I have, the quantity that I&nbsp;&nbsp; am buying per grid and most importantly,&nbsp; each grid will have its own entry price.
[08:43] To repeat, I will simulate a situation of the&nbsp; price dropping to zero and will record the PnL&nbsp;&nbsp; amount. That's the amount that I need to&nbsp; maintain in my margin, free and unused.
[08:56] Your potential losses or profits will add up, so&nbsp; I need to perform this calculation for each grid. Since the entry price is lower, the&nbsp; possible loss amount is also lower,&nbsp;&nbsp;
[09:09] but it is still worth considering, so I am&nbsp; carefully recording it for each position now.&nbsp;&nbsp; I think you are starting to see my point. Even if&nbsp; you allocate a small amount to a Grid Strategy,&nbsp;&nbsp; the high leverage will increase your&nbsp; possibility of profit but also of a loss.&nbsp;&nbsp;
[09:25] I have allocated only five dollars with a 50x&nbsp; leverage and if I want this setup to have no risk&nbsp;&nbsp; of liquidation, I need to have several hundreds of&nbsp; dollars staying in my Futures wallet as a possible&nbsp;&nbsp; collateral. Another factor that impacts the&nbsp; total amount you need to hold is the number&nbsp;&nbsp;
[09:41] of grids - the more grids you will request to be&nbsp; implemented, the higher your stake and thus the&nbsp;&nbsp; leverage that you need to maintain. 257 USDT. This&nbsp; is the total amount you need to leverage, in case&nbsp;&nbsp;
[09:54] you'll buy all of these Long positions and the&nbsp; price will drop to zero or close to zero. If you&nbsp;&nbsp; have less than this, all grids that you open will&nbsp; be cancelled and your account will be emptied.
[10:09] In this video I have demonstrated an approach I&nbsp; use currently when the crypto market is bullish.&nbsp;&nbsp; It works well and I was able to repeat the results&nbsp; I am showing here day after day. I had also lost&nbsp;&nbsp; some of my money by opening too many grids and&nbsp; not having a sufficient balance on my account.&nbsp;&nbsp;
[10:25] Thus I have laid out the 3 rules for myself and&nbsp; I had shared these rules with you. #1 - Trade&nbsp;&nbsp; only Perpetual Futures contracts. #2 - Set up&nbsp; grids under the current price level and never&nbsp;&nbsp;
[10:37] buy a Sell/Short position, and #3 - Maintain a&nbsp; sufficient account balance to avoid liquidations. Once you set up your grid let it do its&nbsp; job. Do not worry if the price goes down,&nbsp;&nbsp;
[10:50] this is exactly what you wan. When the&nbsp; price recovers you will earn profit. As you can see on the screen, now in this&nbsp; example I am violating my 3rd rule - my&nbsp;&nbsp;
[11:02] balance is only 27 USDT, so I am taking a lot&nbsp; of risks here. I strongly advise against this. Moreover, when using Grid Trading Strategy, do not&nbsp; trust the Liquidation Price value you'll see on&nbsp;&nbsp;
[11:17] your screen, because it is not final. As I had&nbsp; shown to you via Excel calculation, the amount&nbsp;&nbsp; required to avoid liquidation is growing with each&nbsp; open position, so do not be mislead by this value.
[11:31] And finally, I invite you to try Grid Trading&nbsp; for yourself. Binance is the only platform&nbsp;&nbsp; that I know of that has a feature of&nbsp; Grid Strategy when trading Futures.&nbsp;&nbsp; I left my referral link below and if you&nbsp; don't have a Binance Futures account,&nbsp;&nbsp;
[11:44] you can sign up and receive a 10%&nbsp; discount when trading Futures. Just scroll down for the referral URL below, but&nbsp; also please give me a LIKE if you enjoyed this&nbsp;&nbsp;
[11:56] video. Of course, I would very much appreciate&nbsp; your subscription to my channel and your feedback.&nbsp;&nbsp; Thank You!