What is Contract Grid Trading?

Introduction to Contract Grid Trading
Contract Grid Trading is a strategy that leverages market volatility to generate profits. It enables users to automatically buy and sell assets within different price ranges, allowing for more flexible trading operations and risk management.

Features and Advantages of Contract Grid Trading:
1. Automated Trading Strategy: Contract Grid Trading relies on preset price grids and trading rules, allowing for automatic buy and sell operations during market price fluctuations. This reduces user emotional interference and operational risks.
2. Flexible Trading Approach: Users can set grid trading buy and sell prices based on their trading views and market expectations, adapting to different market trends.
3. Risk Diversification: By gradually buying and selling assets within different price ranges, Contract Grid Trading achieves better risk diversification, reducing potential losses from single trading decisions.
4. Improved Trading Efficiency: Contract Grid Trading can automatically trigger trading operations at specific price points, eliminating the possibility of missing out or delays associated with manual trading.

How to Use Contract Grid Trading:
1. Setting Position Mode and Leverage Multiplier
DOEX offers isolated margin mode for Contract Grid Trading.
* Risk Control
* Flexible Adjustments
* Convenient Management
* Risk Reduction
DOEX also provides leverage trading for Contract Grid Trading.
* Please use leverage prudently to amplify potential profits while maintaining risk control.
2. Setting the Price Ceiling and Floor for Contract Grid Trading
The price ceiling and floor determine the trading range for your grid trading and also impact your trading strategy and risk management.
For example:
If the current price of the BTCUSDT perpetual contract is 48,000 USDT, and you anticipate a price drop once it exceeds 49,000 USDT, you can set the price ceiling at 49,000 USDT. Once the price reaches 49,000 USDT, the grid will stop opening new positions.
3. Contract Grid Trading Arithmetic and Geometric Modes
*Arithmetic Mode:
In arithmetic mode, the price spacing between grid lines is set in an arithmetic progression, dividing the price range from the grid floor to the grid ceiling. (Suitable for markets with relatively low volatility)
The price difference for each grid is calculated as follows:
Price Difference = (Grid Ceiling - Grid Floor) / Number of Grids
This constructs a series of price intervals:
Price 1 = Grid Floor
Price 2 = Grid Floor + Price Difference
Price 3 = Grid Floor + Price Difference * 2
...
Price n = Grid Floor + Price Difference * (n-1)
When it reaches the grid ceiling, n = Number of Grids
For example, in an arithmetic grid with a price difference of 100: 1,000, 1,100, 1,200, 1,300, 1,400... (each price is 100 higher than the previous one).
*Geometric Mode:
In geometric mode, the price spacing between grid lines is set in a geometric progression, dividing the price range from the grid floor to the grid ceiling. (Suitable for markets with relatively high volatility)
The price ratio for each grid is calculated as follows:
Price Ratio = (Grid Ceiling / Grid Floor)^(1 / Number of Grids)
The price difference for each grid is calculated as a percentage:
Price Difference Percentage = ((Grid Ceiling / Grid Floor)^(1 / Number of Grids) - 1) * 100%
This constructs a series of price intervals:
Price 1 = Grid Floor
Price 2 = Grid Floor * Price Ratio
Price 3 = Grid Floor * Price Ratio^2
...
Price n = Grid Floor * Price Ratio^(n - 1)
When it reaches the grid ceiling, n = Number of Grids
For example, in a geometric grid with a price difference percentage of 10%: 1,000, 1,100, 1,210, 1,331, 1,464.1... (each price is 10% higher than the previous one).
4. Setting Up the Grid
A grid refers to the buy and sell orders that a user sets within a certain price range. These orders are placed at different price points, creating a price grid, which automatically triggers trading operations as the market price fluctuates.
For instance, a user can set the number of limit orders in DOEX as follows (Floor - 2, Ceiling - 99).
5. How to Calculate Single Grid Profit (After Deducting Trading Fees)
Single grid profit refers to the amount of profit or loss generated from a single grid trade in Contract Grid Trading.
*Arithmetic Grid:
d = (Grid Ceiling - Grid Floor) / Number of Grids
c = Trading Fee Rate (Your current maker/taker fee rate)
Lower Limit of Profit per Grid = (Grid Ceiling * (1 - c)) / (Grid Ceiling - d) - 1 - c
Upper Limit of Profit per Grid = (1 - c) * d / Grid Floor - 2 * c
For example: Price Range = 1,000 - 2,000, Number of Grids = 10, Trading Fee Rate = 0.06%
Price Difference per Grid = (2000 - 1000) / 10 = 100
Lower Limit of Profit per Grid = (2000 * (1 - 0.06%)) / (2000 - 100) - 1 - 0.06% = 5.26%
Upper Limit of Profit per Grid = (1 - 0.06%) * 100 / 1,000 - 2 * 0.06% = 9.87%
*Geometric Grid:
r = (Grid Ceiling / Grid Floor) ^ (1 / Number of Grids)
c = Trading Fee Rate (Your current maker/taker fee rate)
Profit per Grid (Geometric) = (1 - c) * r - 1 - c
For example: Price Range = 1,000 - 2,000, Number of Grids = 10, Trading Fee Rate = 0.06%
Price Ratio per Grid = (2,000 / 1,000) ^ (1 / 10) = 107.18%
Profit per Grid (Geometric) = (1 - 0.06%) * 107.18% - 1 - 0.06% = 7.05%
6. Margin Allocation
Users need to allocate a certain amount of margin to ensure the execution of their trading strategy.
Users can adjust the percentage of investable funds, up to a maximum of 100% (Margin Invested = Percentage * Available Balance).
* The margin allocated must fall within the range of the minimum initial margin and the available margin.
* Minimum Initial Margin = Σ (Minimum Order Quantity * Preset Order Price) / Leverage;
7. Total Investment Amount in Contract Grid Trading
The total investment amount refers to the total capital you allocate as margin in this trading strategy: the size of your available funds using leverage.
Total Amount = Margin Invested * Leverage
Once leverage is set:
Minimum Initial Value = Σ (Minimum Order Quantity * Preset Order Price)
Maximum Initial Value = Margin * Leverage
8. Order Quantity per Grid
Order Quantity = Adjustment Coefficient * Margin Invested * Leverage / (Number of Grids * Preset Order Price * Contract Multiplier)
9. Available Margin Balance
This refers to the margin balance in a user's wallet account.
10. Trigger Price in Contract Grid Trading
The trigger price is the price point at which buying or selling operations are triggered when the market price reaches or surpasses a specific price level.
If not selected, the default is to trigger the grid order immediately.
11. Contract Grid Trading Termination Top Price (Optional)
This refers to a price point set by the user in the grid trading strategy. When the market price rises to this level, the strategy will automatically terminate or pause grid trading, no longer opening new positions or adding grids.
12. Contract Grid Trading Termination Bottom Price (Optional)
This refers to a price point set by the user in the grid trading strategy. When the market price falls to this level, the strategy will automatically terminate or pause grid trading, no longer opening new positions or adding grids.

Note:
Orders in grid trading cannot be modified once placed.

Contract Grid Trading Practical Simulation:
Example:
When using a long grid trading strategy, you can set up a series of price grids based on market conditions and expectations to profit when the market rises. Here's an example using the BTC/USDT perpetual contract to illustrate the operational process and expectations of a long grid trading strategy:
* Set Parameters:
Upper Price Range: 60,000 USDT
Lower Price Range: 40,000 USDT
Number of Grids: 5 grids / arithmetic grid
Investment Amount: 10,000 USDT
BTCUSDT Price at Strategy Creation: 50,000 USDT
* Based on the above parameters, the price (in USDT) that this strategy constructs is:
Grid 1: 60,000 USDT
Grid 2: 56,000 USDT
Grid 3: 52,000 USDT
Grid 4: 48,000 USDT
Grid 5: 44,000 USDT
Grid 6: 40,000 USDT
Note: A long grid places long orders from top to bottom. After each long order is executed, a closing order is placed above it at a specific price.
* Placing Orders and Executions:
1. At the start of the strategy, based on the latest price of 50,000 USDT, long orders are placed starting from the 2nd grid (56,000 USDT). This is because the 1st grid (60,000 USDT) does not have an upper price point.
2. When the long order in the 2nd grid (56,000 USDT) is executed, a closing order is placed at the upper price point of the 1st grid (60,000 USDT).
3. When the long order in the 3rd grid (52,000 USDT) is executed, a closing order is placed at the upper price point of the 2nd grid (56,000 USDT).
4. The long order in the 4th grid (48,000 USDT) does not get executed because the current market price of 50,000 USDT is higher than 48,000 USDT. Therefore, there is no closing order placed at the price point of the 3rd grid (52,000 USDT).
5. For the 5th grid (44,000 USDT) and the 6th grid (40,000 USDT), both of them are below the latest price of 50,000 USDT, so no long orders are executed in these grids.

* Strategy Execution:
1. If the market price falls below 48,000 USDT, the long order in the 4th grid (48,000 USDT) will be executed, and the program will automatically place a closing order at the upper price point of the 4th grid, which is 52,000 USDT.
2. If the price rises, buy orders are placed at corresponding lower positions after the sell orders are executed.
Through these operations, you can take advantage of price fluctuations in an upward-trending market, conducting multiple buy and sell orders to profit from the price differences. Additionally, the strategy utilizes closing orders to automatically close positions when the market reaches specific price points, locking in realized profits.
It's important to note that market conditions are continuously changing, so you should closely monitor the market and make adjustments as needed. Furthermore, prudent risk management and position control are crucial in trading. When using a long grid trading strategy, it's essential to carefully consider market risks.

Risk Warning:
Contract trading carries a higher level of risk and may result in significant profits or losses. Past profits do not guarantee future returns. In the event of extreme market price fluctuations, it is possible to have your entire margin balance liquidated. Please note that DOEX will not be responsible for any losses you may incur. Before participating in contract trading, please ensure you fully understand the associated risks and take appropriate risk management measures.

DOEX Team
August 24th

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