Born long before the AI hype, trading bots have been around for a while now, especially in the realm of cryptocurrencies. The very essence of a trading bot lies in the automation of buying low and selling high, without the active intervention of a user. Whilst there exists a plethora of different trading bots, perhaps one of the simplest yet most robust trading strategy is that of a grid trading bot which places buy and sell orders automatically in grids within predefined price limits, effortlessly generating profits by capturing fluctuations in price.

In a previous article, I discussed how grid trading bots present a unique opportunity to enhance the profitability of cryptocurrency investments, using the Binance BTC/TUSD spot trading bot as an example.

Today, I bring you a follow-up article to update on the profitability of the above-mentioned trading bot on Binance after running it for 2 months, providing insights to uncover the truth behind the growing hype surrounding these trading bots.

Analyzing Bitcoin’s Performance

Trading at $30,300 at the time of writing, Bitcoin is once again at one of its most pivotal key resistance levels of between $30,000 to $31,000. The past 2 months has seen quite a degree of market fluctuation from its pivot high of $31,400 to a low of $25,000 — no thanks to the turbulence in market brought about by news such as SEC’s florid crackdown on cryptocurrency giant platforms like Binance and Coinbase. As we are currently at a key resistance level, only time will tell if this will turn into a support zone in the near future — but not without first requiring a significant momentum of buying pressure. Until then, we can expect Bitcoin to somewhat fluctuate within these key levels — presenting an enticing opportunity for which a trading bot would be most suited, which is an automated process of buying low and selling high!

The Concept of A Grid Trading Bot

Torecap, a grid trading bot creates, within a predefined price range, multiple operational grids at which it sells (when prices hike) or buys (when prices dump), generating money in the form of “grid profits” in addition to unrealized gains/ losses from the prevailing value of the asset purchased.

Beauty in simplicity

The grid trading bot is one of my favourite types of trading bot around — its utility should not be underestimated despite its simplicity. In the event of a market dip, I would end up with a larger proportion of cryptocurrencies in my holdings, which I am content to HODL for the forthcoming bull run. Conversely, if the market experiences a surge, I would possess a relatively greater proportion of stablecoins, ready to invest in the subsequent market downturn. This cycle repeats, harnessing the power of market fluctuations.

My Results After 2 Months

The trading bot was created on Binance on 21/4/2023 when Bitcoin was trading at $28,000 — the results of which after 1 month was shared in my previous article here.

2 months down the road, this same BTC/TUSD grid trading bot on Binance has generated me gains from both floating (as a result of Bitcoin’s price appreciation from $28,000) and grid profits (as a result of buying low and selling high in grids), giving me a total profit of $31.2 in TUSD, which is 10.46% of my initial capital of $298 — up from 2.7% from the previous month. This translates into an impressive APY of 63%! Of course, this profit is bound to fluctuate based on the prevailing price of Bitcoin, which may be highly volatile — but it illustrates well the utility of the grid trading bot as a DCA tool into the market that helps to spread out the investments over a period of time and price range so that effects of market fluctuations can be negated. In fact, the longer the bot is left to operate, the more powerful its strength as a buffer against volatility by virtue of the grid profits generated, provided the bot is still operational within the predefined price limits.

Are there any risks?

Itis worth noting that like any other investments, trading bots are not without its own pitfalls, a few of which are highlighted below.

• The bot is only as useful as its configuration including the asset of choice and trading strategy employed. In the example of the grid trading bot as above, of pivotal importance are the price limits of the bot, which ideally should be key support (for the lower limit) and resistance levels (for the upper limit) within which the bot should operate. If this range is set too tight, the bot may cease to operate when the price exceeds a particular limit; conversely, if the range is set too broad, price fluctuations may not be well capitulated as the grids would be too far apart, in which case the amount of capital required would also be higher. As such, the configuration of a trading bot is an art to be acquired.
• Trading bots usually operate on trading platforms, which essentially means that your funds are kept in third party custody. Not your keys, not your coins!

Final Thoughts

There exists a wide array of cryptocurrency trading bots in the market, catering to various preferences and risk tolerances. Among my favorites are , Pionex, Jet-bot, and those integrated within exchanges such as Binance, Huobi, and MEXC, some of which I have previously highlighted in my earlier article.