Grid Trading on Binance Futures: 3-Step Guide & Transcript

[00:00] Welcome to the Trading With A Bot channel.  Here on the screen I have a Grid Trading   Strategy for IOST and Tether crypto pair,  trading it on the Binance Futures platform.  

[00:12] I had covered Grid Trading in my other videos  of the Bitsgap platform. Binance Futures Grid   Trading, however, is very different. What you see  on the screen now is the grid setup for IOST_USDT  

[00:28] crypto pair. In this video I will show you the  loss and the profit I had made with this pair,   how to set up Grid Trading and most importantly,  how to manage your risks in order for you   to avoid losing your money. Unlike with  the regular Spot trading, where you buy,  

[00:43] hold and sell crypto tokens, in Futures  trading you are buying and selling contracts.   Note that I am trading Perpetual Future contracts.  A traditional financial instrument such as Futures   or Options contract will have an expiration date,  but the Perpetual contracts will continue to stay  

[01:00] valid indefinitely. If you are not familiar  with these concepts, I left a link below   in the description for you to learn the basics.  Before I go into the details of this Grid Trading   setup and my approach to Grid Trading, I  want to show you the results I achieve.

[01:19] What you see now on a screen is that  trading this pair is producing a loss.   I purchased 5 Buy/Long positions as the price  went down and they are now waiting to be  

[01:31] closed when the price will go back up. This had  happened within less than a day - all Sell/Short   orders were closed and the strategy  had a realized gain of over 100%.

[01:46] As I close this set up manually at the market  price, you will see that my final realized profit   was 128%. I had achieved it with an initial  investment of $5.20 within 2.5 days. And now  

[02:00] I will go step-by-step and explain how I set  up my grids to avoid buying Short positions   and how I measure my risks to avoid my positions  being liquidated and losing all my money.

[02:12] I have a very simple approach to Grid Trading on  Binance Futures. It consists of 3 steps: #1 - I   always choose Perpetual contracts. When trading  Futures, you are not buying and holding tokens,  

[02:26] but instead you're buying a contract of the  token's future price. You either think the   price will go up and you open a Buy/Long position  or you anticipate that the price will go down   and you open a Sell/Short position. If the  price goes into the direction you predict,  

[02:40] you are making money. Perpetual  Futures contracts do not expire,   so it does not matter when the price goes up  or down, as long as it eventually gets to your   Long or Short position and this position  is closed and the gains are realized.

[02:57] This is the second key element of  my strategy. When I set up my grids   I always make sure that my upper limit is right  below the edge of the Current Price level.

[03:11] I will show you this with an example in a moment.   The reason for this approach is simple - if  you open a Sell/Short position, it may never   get closed if the price continues to go up  and up and your losses may be extremely high.

[03:34] And the #3 and equally important rule: You need  to calculate and ensure sufficient balance in   your Futures wallet that you set aside and hold  as collateral. If your Long or Short positions   will start losing value, your collateral  balance will be held hostage. If the wallet  

[03:49] is sufficiently big you simply maintain  these positions until they become winning,   but if your (maintenance) balance is not  sufficient everything will be liquidated, your   positions will be terminated and your collateral  wallet will be emptied. You will lose everything.

[04:05] Let me continue to illustrate point #2 two and  #3 with examples and some additional details. Within the Grid Setup form you will see the Last  Price at which the crypto pairs Futures contract  

[04:20] is trading. When you create your grid, your  upper price should be right on the edge and   slightly below the value of the Last Price. The  market's Last Price value will jump up and down   every second, so once you create your grid, verify  that you have not opened any Sell/Short positions.  

[04:36] Here as I go into my Active Grid panel  and view the grid that I had just created,   I am making sure that I only  have Buy/Long positions opened. Sometimes the first Buy will be executed  immediately, if the price is fluctuating  

[04:51] up and down, and sometimes you will need to  recreate your grid with a higher upper limit   to trigger the first Buy. The main assumption  of this strategy is that the market is bullish   and that the price will go slightly down,  allowing you to open Buy/Long positions,  

[05:07] but then eventually go back up allowing you to  close all of your open positions with a profit. Remember, if accidentally you  first open a Sell/Short position   so terminate your grid manually if your first  position is a Sell and create a new one again.

[05:33] Watch me here repeating the operations  of opening a grid and adjusting the Upper   Grid Price several times to make sure  that I stay right below the Last Price.  

[05:52] Grid is opened and I go to verify if I  did not accidentally started with a Sell. so now when the price goes down I  will be opening these Buy(s)/Long(s),  

[06:08] and when the price goes back up and reaches  the grid again, I will be closing them.

[06:24] Now the grid is activated, the price is going  down and my Long positions are being opened.   This is exactly what I want.

[06:38] You can see that my PnL is negative and  will continue to be negative until the   price will go back up. Here you just sit back  and watch the grid framework to automatically   perform Buys and Sells. What you need to make  sure of, however, is that you have enough  

[06:52] collateral balance to avoid a liquidation  if the price will continue to go down.   How much collateral balance should you hold?  More than you think. Let me illustrate this   with the last part of this video and the last  rule of my strategy: "Maintain a sufficient  

[07:07] account balance to avoid liquidation,  even if the price drops down to zero."   The Grid Strategy that I had set  up earlier had 15 grids in total.

[07:19] I will now perform a manual calculation of  how much collateral amount I need to hold in   my balance, in case the price will continue to  drop and all of my 15 grids will be opened with   a Buy/Long position. I'll do it in Excel, just  to illustrate a point. First, I'll add the price  

[07:36] levels for each grid. The quantity is the same for  each grid, I am buying 524 IOST tokens per grid   with the setup I had chosen. Remember, I had  invested 5.2 USDT for this grid strategy in total.  

[07:51] Now, let's calculate what happens if the price  continues to go down and I continue to open   Buy/Long positions. I want to see how much balance  I need to hold in my Futures account if the price   will drop to zero. This is absolutely the worst  case scenario - if this happens and if i am able  

[08:07] to withstand it, I will not be liquidated and  will enjoy a profit when the price recovers. amount for each grid position for the  cases when the price drops to zero.

[08:28] In the calculator I am simply reflecting my setup:  the 50x leverage that I have, the quantity that I   am buying per grid and most importantly,  each grid will have its own entry price.

[08:43] To repeat, I will simulate a situation of the  price dropping to zero and will record the PnL   amount. That's the amount that I need to  maintain in my margin, free and unused.

[08:56] Your potential losses or profits will add up, so  I need to perform this calculation for each grid. Since the entry price is lower, the  possible loss amount is also lower,  

[09:09] but it is still worth considering, so I am  carefully recording it for each position now.   I think you are starting to see my point. Even if  you allocate a small amount to a Grid Strategy,   the high leverage will increase your  possibility of profit but also of a loss.  

[09:25] I have allocated only five dollars with a 50x  leverage and if I want this setup to have no risk   of liquidation, I need to have several hundreds of  dollars staying in my Futures wallet as a possible   collateral. Another factor that impacts the  total amount you need to hold is the number  

[09:41] of grids - the more grids you will request to be  implemented, the higher your stake and thus the   leverage that you need to maintain. 257 USDT. This  is the total amount you need to leverage, in case  

[09:54] you'll buy all of these Long positions and the  price will drop to zero or close to zero. If you   have less than this, all grids that you open will  be cancelled and your account will be emptied.

[10:09] In this video I have demonstrated an approach I  use currently when the crypto market is bullish.   It works well and I was able to repeat the results  I am showing here day after day. I had also lost   some of my money by opening too many grids and  not having a sufficient balance on my account.  

[10:25] Thus I have laid out the 3 rules for myself and  I had shared these rules with you. #1 - Trade   only Perpetual Futures contracts. #2 - Set up  grids under the current price level and never  

[10:37] buy a Sell/Short position, and #3 - Maintain a  sufficient account balance to avoid liquidations. Once you set up your grid let it do its  job. Do not worry if the price goes down,  

[10:50] this is exactly what you wan. When the  price recovers you will earn profit. As you can see on the screen, now in this  example I am violating my 3rd rule - my  

[11:02] balance is only 27 USDT, so I am taking a lot  of risks here. I strongly advise against this. Moreover, when using Grid Trading Strategy, do not  trust the Liquidation Price value you'll see on  

[11:17] your screen, because it is not final. As I had  shown to you via Excel calculation, the amount   required to avoid liquidation is growing with each  open position, so do not be mislead by this value.

[11:31] And finally, I invite you to try Grid Trading  for yourself. Binance is the only platform   that I know of that has a feature of  Grid Strategy when trading Futures.   I left my referral link below and if you  don't have a Binance Futures account,  

[11:44] you can sign up and receive a 10%  discount when trading Futures. Just scroll down for the referral URL below, but  also please give me a LIKE if you enjoyed this  

[11:56] video. Of course, I would very much appreciate  your subscription to my channel and your feedback.   Thank You!