Many retail traders focus solely on using automated trading systems to trade crypto derivatives such as futures contracts. It does not matter which underlying assets you trade. Since many positions in the market for derivatives are leveraged, you may earn large profits on each trade. However, risks are also high due to using a margin account.

Learning how to use a fully automated crypto futures grid bot is quite important if you want to be successful in the world of crypto. Over 90% of all trades conducted in this domain are automated with over 65% of all individuals and close to 99% of all institutional investors using various types of trading robots to conduct their operations in the crypto market.

Why is futures trading great for grid trading strategies?

Grid bots are quite simple algorithms. They create long or short market positions based on the principles outlined in the DCA methodology. DCA stands for “distributed cost average” which is a commonly used asset acquisition system that allows investors to purchase assets at a discounted price by splitting a single bulk purchase into a series of orders preferably placed during a local downtrend.

Using this approach allows you to get close to the minimal price without trying to intentionally time the market and risk missing the best opportunity to buy. DCA is a great concept and allows you to use limited resources efficiently by reducing the average price of asset acquisition. It works well for systems that create multiple market orders too.

Grid bots generally do the following:

1. Create a series of buy orders during a downtrend.
2. Create exit sell orders for each of the created market positions.
3. Set stop loss and take profit limits automatically.
4. Liquidate all positions at an opportune moment.
5. Repeat the loop when triggered by a signal.

A trading signal should alert the bot when the market is entering a period of downward movement. If you plan to use the bot for short selling, you should alert it when the market is getting bullish. Choosing the right technical analysis strategy for the bot is quite important.

How to pick the right indicators

If you want to use futures trading grid bots for passive income, it is extremely important to trigger them at the right moment when market conditions favor DCA-based algorithmic trading. You need to look for lengthy price retracements or prepare for new upward trends. There are several technical indicators that are perfect for this particular job.

Here are ways to forecast future trends:

• Use Relative Strength Index (RSI) to look for potential reversals. RSI is a technical indicator that shows when an asset is oversold or overbought. It is very easy to use. When it approaches upper limits, you should be ready to short sell. When it goes down, you should be on the lookout for a new bullish trend. It is important to find the right settings. After some trial and error, it is possible to create a very reliable signaling system based on RSI alone.
• Moving Average Convergence/Divergence (MACD) is an excellent tool to identify strong trends during which you should place orders. When lines of the indicator start going in different directions, it means that the trend is getting stronger. When they converge, you should prepare for a reversal. MACD can be used to activate trend-following strategies or to identify price retracements.
• Bollinger Bands (BB) breakouts are great signals for a new trend or price retracement. When the price suddenly goes beyond the limits of standard deviation, it means that the market is affected by an unexpected external influence or that the sentiment is changing rapidly. When BB breakout indicates a downward trend, it is a good moment to start placing buy orders.

Remember that profitable trading with futures grid bots is possible only if you activate them in time and allow them to work during periods of favorable market conditions. Leaving them to work without any supervision is not a good idea.

Risk management techniques to use with futures grid bots

While grid bots are quite safe with strategically placed stop losses, it is important to use common risk mitigation methods to avoid undesired losses. You should use approaches that all investors use to reduce the danger to their assets when engaging in active trading.

Here are some tips to avoid unnecessary risks:

• Limit position sizes. It is hugely important to set a specific position size for each buy order created by your grid bots. If you allow them to run rampant without any limitations, you will lose money on unfortunate trades. We suggest limiting the position size to just 1% — 2% of your total assets and focus on achieving consistency instead of chasing a huge payout.
• Avoid trading during periods of volatility. Prices may fluctuate chaotically after and right before important economic events that may affect the sentiment. Volatility can be caused by other factors. Use technical indicators designed specifically to predict periods of instability in the market. It is a good idea to stop trading during these moments.
• Manage your leverage. Margin accounts are often flexible and allow traders to choose the size of leverage used for cryptocurrency trading. Reduce leverage to avoid unnecessary losses and significant risks to your portfolio. When possible, trade with what you can muster instead of relying on borrowed funds.
• Work with reliable automation providers. Vendors like the WunderTrading platform offer consumer-oriented prices, versatile product lineups, and service stability. You should always try to choose vendors that will provide an excellent level of service without compromising anything.

Remember that your main priority while operating futures grid trading bots is to achieve consistent performance. Automation is very useful when building systems capable of producing relatively low profits without significant risks. You should not use it to try and earn money or reach unfeasible profitability levels.

Follow our tips, use sensible risk management techniques, avoid huge leverage, and experiment with technical analysis strategies until you find a good balance.