3Commas recently introduced some new cool upgrades to grid bots including the option to enable upper and lower Stop loss levels. Each can have its own action:
- stop bot
- stop bot and buy base currency (upper SL)
- stop bot and sell base currency (lower SL)
Depending on how you are planning to use a grid bot these elements can provide an extra level of risk management in case your assumptions are not fulfilled.
For example, if you are expecting the price of an asset to dump and you think the most likely new channel is going to be located within certain prices but you think there’s a chance price will fail to hold and carry on going down to a lower channel then you can make use of either:
- a wider range grid bot that covers both channels compromising funds allocation. If price ends up going sideways within the lower channel, then all the higher levels of the grid won’t contribute enough to the PNL.
- Use two grids using lower stop loss. Each grid located in a the two potential areas of accumulation once the price finds a local bottom. If the price fails to hold within the higher channel the stop loss will trigger and the second grid will be waiting for price to enter the lower channel.
This is not an easy task necessarily and that’s why I think backtesting can become a powerful tool and educational activity to learn how to take best advantage of grid bots.
In the chart below you can see how a grid using upper SL can also take advantage of price first finding a bottom and then stoping the grid at 22K. You will notice that even if the price starts coming down from the 22K level and re entering the grid range it’s still not buying it back as it normally would. This is because we are using upper SL with action stop bot.
If we used buy base currency too, then it would re buy BTC with all available quote currency. This option doesn’t seem great with the price action seen in the chart, but it could be a great idea if BTC pumped strongly away from the grid range entering a new strong uptrend. Even if you would end up buying BTC more expensive, the pump will end up compensating.
The upper and lower SL represent great value but it clearly depends on how accurate is your hypothesis. The SL can help mitigating the risks of being wrong and also can be used to execute a plan if you think that you know what’s going to be the breakout direction after a sideways temporarly consolidation.
You can gain access to TTP grid backtester joining TTP with the entry tier Picnic.