DCA vs Grid Bot: The Differences Explained (2022)

Last Updated: June 21, 2022
In this article, we will be exploring in detail DCA vs Grid Bot. Keep reading to find out more!
DCA vs Grid Bot: The Differences Explained
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What is Grid Trading?

Grid Trading Bot

In case you don’t know really, a grid bot is a cryptocurrency trading bot that has been designed to help traders execute a grid trading strategy.

In contrast to a lot of trading strategies, a grid trading strategy works really well in a ranging sideways market that doesn’t have a clear direction.

It is going to make its profit from the highs and lows of price movements in the market and is really effective when there is no obvious uptrend or downtrend for an elongated period of time.

The greater the magnitude and frequency of fluctuations in price, the more profit you are going to make from a grid strategy.

In layman’s terms, grid trading strategies create a grid-like formation by setting up or scheduling buy and sell orders, and a price range that has been predefined.

First, you will need to decide on your price range for your strategy, and after this, you will need to choose the number of grids that you want to include.

You can divide your price range into multiple smaller grids as well, which is going to increase the chances of triggering trades.

Let’s look at DCA vs grid bot.

How a Grid Trading Bot Works

When thinking about DCA vs grid bot, the more grids that you develop, the higher the trade frequency, as a result of reduced grid width.

However, how much you can earn from each order is going to decrease as well. Whenever you trigger a buy order, the grid trading bot places a buy and sell order.

If the price continues to decrease after the buy order was implemented, the bot is going to place another buy order, as well as a separate sell order to it.

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These additional orders are safety orders. This means that even if the market is unpredictable, and takes a sideways movement, you are still going to be able to keep trading and implementing take profit orders with those additional buys.

A grid strategy involves selling a small amount when the price increases, and buying a small amount when the price decreases, as long as the price stays within your set parameters.

DCA Trading

When considering DCA vs grid bot, DCA is otherwise known as dollar cost averaging, and it is an investing strategy that can help you reduce risk and save money, by lowering the amount that you are going to pay for your investments.

It lets you purchase an asset in smaller amounts, as opposed to buying it all at once.

For a short trading bot, the first order is going to be a sell order, and your dollar cost averaging bot is going to place your first buy order, as well as additional orders of the price that go in the opposite direction of your chosen strategy.

For all the buy orders that were placed previously it’s going to place only one take profit order.

It recalculates the price of taking profit, with each new buy order, so that the profit from all of your orders is going to be equal to the TP parameters that you set.

How a DCA Bot Works (Long Strategy)

First, your trading bot is going to place a buy order as a limit order.

Once this is done, the bot is going to place the take profit order, as well as the extra order at a price that is lower than the first order, based on a percentage drop that you have set.

If the extra order is implemented, then the cryptocurrency bot is going to take the take profit order of your first order off the exchange and place a new take profit order with the price recalculated based on the average buy price for two buy orders, as well as the take profit percentage that you have set.

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The bot is also going to place a second extra order underneath the first order price. When the second extra order is implemented, the cycle can be repeated.

This means that no more than one sell and one buy order is on the cryptocurrency exchange at the same time.

DCA vs Grid Bot: The Differences

Grid Bots

  • It’s going to place a take profit for each order separately.
  • It works best when a pair is within a range that doesn’t have a clear down or up trend, and either a sideways or a longer market.
  • A grid trading bot is going to let you profit from fluctuations in the market, without having to possess a lot of coins.

DCA Bots

  • This type of bot is going to place one take profit for all of your orders.
  • A DCA bot reduces the risk of buying high, by investing at consistent sequences.
  • And it’s going to help you with average token buying, so you will have purchased a lot of coins for a reasonable price, over a specific period.

How to Use a DCA Bot

DCA Bot

We’re going to use Pionex to show you how to make a DCA bot in this article about DCA vs grid bot.

The first thing that you will need to do is open the Pionex website, and then find the DCA bot that you will see to the right of your interface.

Pionex is going to let you choose between five time intervals for your strategy; 2 minutes, and hour, four hours, six hours, 12 hours, a day, one week, and one month.

DCA Bot

After you have included your parameters for DCA, then your investment per week is going to be calculated and will show up below.

This will be the minimum balance that you need to begin your DCA strategy. Your funds are going to be frozen in a DCA pool once you have started your strategy.

Your DCA strategy is always going to freeze your funds for seven days, once you have started it.

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After the funds in the pool have been drained, it is going to ask you if you want to freeze more funds for an additional week.

Once you don’t have enough money left in your account, your strategy is going to be cancelled.

If you choose one month as your interval for investment, the minimum amount needed for your DCA strategy is going to be the funds that you need for one month.

How to Use a Grid Trading Bot

Go to the Pionex website and choose the grid trading bot that you’ll see on the list of trading tools.

Pionex is going to let you choose from two different kinds of grid trading bots, either ‘set myself’, or ‘use AI strategy’.

AI Strategy

AI Strategy for Grid Bot

If you select ‘use AI strategy’, then Pionex’s AI advisor is going to recommend a set of parameters on your behalf.

These are going to be calculated from backtesting the last seven days.

As a preview, you are going to see the recommended profit per grid, as well as the recommended price range.

All you need to do is use the slider to select how much of your funds you want to use, and when you have done this, you can select ‘create’, and the bot is going to start trading and generating a passive income on your behalf.

Customized Parameters with a Grid Bot

Customized Parameters for Grid Bot

If you choose to set your Pionex bot yourself, you will need to put in a number of different parameters, including lower and upper price limit, number of grids, total investment for your bot, and more.

Once you have created your bot, it is going to ask you permission to reallocate the amount of the two tokens of the chosen pair on your behalf.

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A number of buy and sell orders are going to be placed, which is going to allow the bot to buy low, and sell high for you, as long as the price fluctuates within the price range that you have set.

DCA vs Grid Bot: Final Thoughts

Of course, there are going to be upsides and downsides to both trading bot options that we have discussed here today when thinking about DCA vs grid bot.

The thing about using either strategy when it comes to trading your cryptocurrency is that both are going to be effective, and both are going to help you generate a passive income; at the end of the day, you’ve got to decide which one is going to suit you the best.

In fact, we recommend that if you go through Pionex when considering DCA vs grid bot, you test them both out in the beginning, and decide which one is working best for you. Good luck with your future crypto trades!

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Written by Thomas McGovern

Thomas has over a decade of experience with blockchain and cryptography. He writes regularly for EarthWeb and holds a M.S. in Mathematics.
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