Bots and automation · Practical guide
A bot follows rules. Choosing them, understanding them, and reviewing their risk remain your responsibility.
What a grid bot does
A grid distributes buy and sell orders within a price range. It aims to benefit from fluctuations: buying at certain levels and selling at higher ones. It does not predict where the market will go.
If the price leaves the range, part of the strategy may become inactive. In a Spot grid, you may end up holding a coin that has fallen in value (Base currency). Automating orders does not eliminate that risk.
What are the base and quote currencies?
A trading pair shows two currencies. The first is the base currency; the second is the quote currency, also called the counter currency.
- Base currency: the asset you buy or sell.
- Quote currency: the currency in which the price is expressed. When buying the base currency, you pay with the quote currency; when selling it, you receive the quote currency.
| Pair | Base currency | Quote currency |
|---|---|---|
| BTC/USD | BTC | USD |
| ETH/BTC | ETH | BTC |
Example: BTC/USD
If the price is 100,000 USD, it means that 1 BTC costs 100,000 USD. You buy BTC by paying USD; you sell BTC and receive USD.
Example: ETH/BTC
If the price is 0.04 BTC, it means that 1 ETH costs 0.04 BTC. You buy ETH by paying BTC; you sell ETH and receive BTC.
The key point: BTC is the base currency in BTC/USD, but the quote currency in ETH/BTC. The quote currency does not have to be a dollar or a stablecoin.
Illustrative prices, not live quotes.
The number to watch
Grid profit does not mean total profit. Closed trades may show profits while the coins held by the bot lose value.
Suppose you start with 1,000 USD. If realized grid profit is +30 and the unrealized loss is −90, your combined result would be −60, before any costs not included. You have not earned 30: the whole balance matters. Therefore, the total result is Grid Profit + unrealized gain or loss. When the bot shows the result net of fees, they have already been deducted: do not subtract them again.
Before activating it, answer these three questions
- Why did you choose this asset, and what risk would you accept when holding it?
- What scenario and analysis justify the chosen range?
- What will you do if the price breaks above or below the range?
How to build a well-reasoned strategy
Analyze the asset before activating the bot
Study its trend, liquidity, volatility, and the areas that justify the chosen range. Also decide what you will do if it leaves that range: your Plan B must be defined before you start.
Avoid blind copy trading. Do not copy a configuration just because it ranks highly. Without knowing what lies behind it—its strategy, time in operation, and temporary losses—the reported return tells you very little. Past results do not guarantee future results.
Look for profit per grid that covers fees
As a general guideline in this guide, we look for net profit per grid above 0.25%, adjusting it to the asset and its movements. Settings of 0.3%, 0.5%, or above 1% may make sense: the larger the profit per cycle, the smaller the relative weight of fees. In return, the price must travel further and fewer cycles may be completed.
A fee of 0.05% when buying and 0.05% when selling adds up to approximately 0.10% per cycle. Therefore, a gross move of 0.10% would barely cover both fees. If the bot shows a net profit per grid of 0.10%, that profit is already calculated after fees: you must not subtract them again.
0.25% is not a mandatory minimum, and there is no ideal percentage for every market. Check the bot’s net estimate and seek a balance between profit per cycle and trading frequency.
Choose how to distribute the orders
Comparing the same range and number of grids: if you want more buy levels in the lower area to take advantage of falls, use Geometricmode. If you prefer more sell levels in the upper area to take advantage of rises, use Arithmeticmode. Click either one to see the difference.
Arithmetic vs. geometric: differences and example
Arithmetic: keeps the same price distance between levels. If the spacing is 1,000 USD, each level will be 1,000 USD above the previous one; the percentage between them will change.
Geometric: keeps the same percentage between levels. The distance in USD is smaller at the bottom and larger at the top. Therefore, the profit percentage per grid remains approximately the same between levels.
Want to see the difference? Try the same range and number of grids in both modes and visually compare the spacing between orders.
Try the Grid simulator →Let’s see how each mode progresses from 100,000 USD: arithmetic adds 1,000 USD and geometric adds 1% to the price of each previous level.
| Level | Arithmetic +1,000 USD | Geometric +1% |
|---|---|---|
| Start | 100,000 | 100,000 |
| 1 | 101,000 | 101,000 |
| 2 | 102,000 | 102,010 |
| 3 | 103,000 | 103,030.10 |
| 4 | 104,000 | 104,060.40 |
The difference: in arithmetic, we always add 1,000 USD; in geometric, 1% is first 1,000 USD, then 1,010 USD, then 1,020.10 USD… The final prices differ because we set different spacing.
When you configure both modes with the same range and number of intervals, geometric places relatively more levels in the lower area; arithmetic leaves relatively more in the upper area and may complete more steps during a rise through that zone.
More steps do not automatically mean more profit. The result also depends on the capital in each order and the price path. Accumulating more base currency also depends on how the bot allocates capital, not just the selected mode.
Your configured range affects that allocation: part remains in the quote currency for buys below the current price, and part in the base currency for sells above it.
For example, with a current price of 100 USD:
- 50% down and 30% up (50–130 USD): the bot reserves more capital for buys than for sells.
- 50% down and 200% up (50–300 USD): the bot allocates more capital to holding base currency for sells than to reserving funds for buys.
The exact allocation also depends on the number of grids and order sizes.
If we set up two “equivalent, bullish” bots, comparing the same range, number of grids, and capital allocated to each bot, on the same asset and using the same order allocation criteria, geometric mode may accumulate slightly more base currency during a fallby concentrating more levels in the lower area. Arithmetic mode often earns slightly more profit in the quote currency when the price rises. The final difference will depend on which orders actually execute.
Illustrative prices in USD.
Your next step
Prepare a plan A and a plan B. Then compare one bot with several. If the bot uses Futures, start by understanding liquidation and margin.
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