Neutral grid is a non-directional contract strategy designed for volatile markets. Its core idea is to capture profits from market price fluctuations by setting different buy and sell grids during market price volatility. This article will quickly introduce you to the principles, advantages, disadvantages, and actual opening methods of neutral grids.
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Contract grid trading is an automated trading strategy designed to utilize market price fluctuations to repeatedly buy and sell, thereby profiting within different price ranges. In simple terms, its core idea is to capture profits from each fluctuation by setting different buy and sell grids during market price fluctuations.
What is a neutral grid?
The neutral grid is a type of contract grid. The core concept of this strategy is: when the market is fluctuating within a certain range, it automatically redeems profits through 'buying low and selling high'.
Unlike the directional grid strategy, the neutral grid simultaneously establishes long and short positions, allowing it to utilize both upward and downward fluctuations within the price range.
What is a contract neutral grid?
Applicable scenarios: Use when you judge that prices will fluctuate within a range.
Specific operation: Contract grid - neutral mode does not establish positions initially. Place short orders above the market price and long orders below. Open shorts when prices are high/close longs, and close shorts/open longs when prices are low.
Due to the initial non-positioning, the margin for neutral grid is generally more ample than for long and short grids, leading to better liquidation prices.
The characteristics of contract grids compared to spot and manual contract trading
Contract Grid VS Spot VS Contract
What kind of market is suitable for neutral grid?
When investors expect the market to fluctuate within a certain range in the future, it is suitable to use a neutral grid. When establishing a neutral grid, there is no immediate buying or selling. Instead, short positions are gradually established when prices rise, and long positions are gradually established when prices fall, purely profiting from volatility.
Taking the following chart as an example, if the price is fluctuating within a box range without showing a clear trend, it is suitable for pairing with neutral grid market conditions.
How does the neutral grid work? Principles of neutral grid operation.
Neutral grid trading is similar to regular grid trading, where orders are placed at different price levels, but the difference is that neutral grid trading places both long and short orders simultaneously within a price range.
Above current price: pre-set short orders
Below current price: pre-set long orders
After understanding the operation principles of the neutral grid, we can discover the best scenarios for using the neutral grid:
Markets with very intense range fluctuations: Earn substantial profits through up and down volatility.
Opening and closing positions at the same price: when closing positions, the various pending orders in the neutral grid will not incur losses.
Differences between neutral grid and long grid
Neutral grid: Holding both long and short positions simultaneously, suitable for flat volatile markets.
Long grid: Holding long positions, expecting the market to rise, suitable for upward volatile markets.
Neutral grid vs Long grid
Neutral grid risk analysis
Advantages of neutral grid
Profits can be earned from both rising and falling markets.
Regardless of market direction, as long as it is within the set price range, profits can be earned from both upward and downward fluctuations.
. 24-hour fully automated trading, no need to monitor the market.
Cryptocurrency is traded 24 hours a day, unlike stocks that have opening and closing times and no holidays. Neutral grid trading usually pairs with robots for order placement, allowing you to trade even while you sleep, reducing the need to constantly monitor the market and providing more peace of mind.
· Overcoming human weaknesses
Chasing highs and selling at lows is human nature, but grid trading robots must establish a trading plan before opening orders to avoid emotional influences causing arbitrary chasing of highs and lows.
Disadvantages and risks of neutral grid
Like most grid trades, there are issues of low capital utilization and high trading costs, as well as pausing trading when breaking out of the range. Additionally, here are the disadvantages of the neutral grid.
Unilateral market risk is high.
After breaking through the price range, as long as it keeps rising or falling without returning to the opening price, it may cause investors to suffer floating losses or even give back profits.
· Closing conditions are relatively strict
Taking long grid as an example, as long as you close positions at high prices, most pending orders can be profitable closures: Neutral grid requires prices to enter and exit at the same price level to avoid losses on pending orders.
Neutral grid opening order tutorial
Currently, both Binance (officially registered official download) and Pionex support neutral grid trading robot features. Investors can refer to the following articles based on their commonly used exchanges.
[Further Reading]
Binance Grid Trading Practical Teaching: Low-Risk Arbitrage Strategies in a Volatile Market
- Understanding whether cryptocurrency contract grid trading will lead to liquidation?
Three steps to create a Pionex contract grid
Currently, the Pionex contract grid has been officially released. Android users can download the latest APK from the official website or update on Google Play; iOS users can first update on Testflight, and it will also be updated on the App Store in the future: Users can also use the contract grid robot directly on the Pionex web platform.
The specific operation process is as follows:
Step 1, download/update and log in to the latest version of the Pionex App to use the Pionex contract grid. Step 2, go to the homepage of the Pionex App, click on the bottom menu bar [Trading] to enter the [Quantitative Trading] page and you will see [Contract Grid].
Step 3: After entering [Contract Grid], select [Manual Settings] to manually set grid parameters to create the grid. The process of using [Manual Settings] to create a grid is as follows:
Choose trading pairs (click the default BTCUSDT trading pair in the upper left corner to pop up the contract trading pair selection page)
Choose to go long or short, and set the price range and grid quantity.
Input investment amount and select leverage multiple
Finally, click [Create Robot], you can also expand the [Advanced Settings] below to input parameters such as starting price and automatic stop-loss.
You can also choose [Strategy Following], click [Go Long] or [Go Short] or [Neutral], and the system will recommend the corresponding A1 strategy, allowing you to select your preferred strategy for following.
How to view contract grid profits?
You can directly click [My Orders] on the [Quantitative Trading] page to view the details of all your contract grid order profits.
Contract Grid FAQ
Q: Why is there a distinction between actual investment amount and dynamic margin after opening an order?
A: The actual investment amount is the amount you use to open orders, while the dynamic margin is the reserved 'safety cushion'. You can reserve this amount from the total investment amount when opening an order or add it after opening. This amount is used to hedge your floating losses and reduce liquidation risks. As shown in the image, when you go long, adding dynamic margin will lower your estimated liquidation price, and when shorting, it will raise your estimated liquidation price.
When your grid is close to the liquidation price, you can reduce risk by adding dynamic margin. If your grid later becomes profitable and moves away from the liquidation price, you can withdraw the margin again.
Should I select automatic margin reservation? In what situations is it better to reserve?
A: When you open an order, if you select automatic margin reservation, the system will reserve part of the funds from the total investment amount as a 'safety cushion', which is the dynamic margin. This will lower your estimated liquidation price when going long and raise it when going short. To protect your grid from the liquidation price, we usually recommend you reserve, especially when using higher leverage. If you are already an experienced user of contract grids and prefer to have more control over your funds, you can choose to uncheck margin reservation first and manually fill in the amount you wish to reserve, or adjust the margin using the margin management function after opening an order.
Q: Will grid profits automatically become margin?
A: Yes, your grid profits will help you reduce liquidation risk. However, currently, this portion of grid profit is not available for withdrawal.
Q: Can contract grid profits be withdrawn?
A: Currently, this feature is not available; we are planning it, please be patient, and thank you for your cooperation.
Q: What is the maximum number of orders for a contract grid?
A: For BTC, ETH, and ETH/BTC contracts, you can open a maximum of 20 grid orders under a single cryptocurrency. For BNB contracts, the maximum is 10 orders, and for other contracts, it’s a maximum of 5 orders.
And for the same grid, the maximum grid number is 500.
Q: What is the difference between the marked price and the latest price?
A: The marked price refers to the estimated true value of the contract, which considers the fair value of an asset to avoid unnecessary forced liquidation during drastic market fluctuations.
Pionex's contract grid uses the marked price as the trigger condition for liquidation and calculates floating profits and losses based on the marked price.
Q: What is the funding fee, and why am I being charged?
A: The funding fee is a special mechanism of perpetual contracts aimed at anchoring the contract price to the spot price. This fee exists in both manual trading and grid trading, and it is settled every 8 hours.
If the funding fee is positive, the long position holder pays the short position holder, and vice versa if the funding rate is negative.
Q: After the funding fee is charged, which section will it be deducted/increased? How can I view the historical details?
A: The revenue and expenditure of the funding fee will be reflected in the floating profits and losses; you can find historical details in the order details - transaction records - funding flow records - funding fee records.
Q: Why are there no buy orders within the grid range?
A: This is due to Pionex's use of dynamic pending orders to achieve the two-layer buffer technology. When your number of grids is large, to maximize the use of your margin, the system will not place all orders at once but will place orders near the current price and automatically adjust your pending orders as the price moves.
Additional explanation: What is two-layer buffer technology?
Contracts have a requirement for maintaining margin. When orders are close to being liquidated, unfilled pending orders are usually automatically canceled. In such cases, some exchanges choose to directly close grid trading and automatically liquidate.
However, if the market only sees a spike and quickly recovers, this handling method may cause users to suffer unnecessary losses. In such cases, Pionex does not close users' orders but automatically restores the maximum number of pending orders based on current positions and margins, and automatically places more orders after the user adds margin.
It is precisely because of the two-layer buffering technology that Pionex supports a maximum of 100 times leverage for contract grids, and users can arbitrarily set ranges, grid numbers, and other parameters without considering the interrelation between parameters, greatly enhancing the user experience.
Q: Why is there a prompt that 'the order is close to the estimated liquidation price' when the current price is still far from the estimated liquidation price?
A: Due to leverage, contracts often have large fluctuations in profits and losses. To avoid you missing the chance to add dynamic margin during dramatic market fluctuations, we will notify you when the liquidation price is close.
Q: Why can’t I open a contract grid when the contract account has funds?
A: For risk considerations, Pionex's manual contract trading is in a separate account, while bot strategies and spot trading belong to the main account. If your main account lacks funds but your contract account has funds, you can transfer funds to the main account and then open a contract grid. You can find the transfer button on the account page, or you can transfer funds on the manual settings page for the contract grid, as shown in the image below:
Q: Can contract experience funds offset contract grid transaction fees?
A: No.
For risk considerations, Pionex manual trading is in a separate account, while bot strategies and spot trading belong to the main account. The contract experience fund is only for use in the manual trading account (that is, the contract account) and cannot be used for the main account.
Q: What is a contract grid robot?
Contract grid robots are tools for automated trading strategies. They are designed to periodically establish long and short positions within predetermined price ranges. Grid robots perform best in volatile markets.
Q: Which contracts does the contract grid robot support?
In addition to supporting USDT perpetual contracts, Pionex also supports cryptocurrency trading pairs, including BTC, ETH, and SOL as quote trading pairs.
Q: Is there a limit on the number of contract grids?
Yes. The minimum grid number is 2, and the maximum grid number is 500.
Q: How many contract grid robots can I run simultaneously?
Limit on the total maximum number of orders for the contract grid:
Over 20 orders require an actual investment amount of 100U
Over 30 orders require an actual investment amount of 200U
Over 50 orders require an actual investment amount of 300U
Q: Why does my total profit and loss show a loss while my grid profit is positive?
Grid profit represents the total profit generated by each completed buy and sell order in the trading strategy. However, total profit and loss includes realized profits and unrealized losses. If the open positions in the robot are currently suffering losses and the realized grid profits are insufficient to offset them, you may see negative total profit and loss.
Q: Can I add more margin to my contract grid robot?
Yes, you can go to the 'More' page and click 'Adjust Margin' to add extra margin. The added margin will be considered available balance to maintain your position or for fee deductions and will not affect any robot parameters.
Q: Why does the total number of buy and sell orders not equal my grid number?
Our contract grid robot adopts a dynamic order placement model, and the total number of pending orders is always limited to orders placed near the current price, thereby improving your fund utilization rate and profits, and reducing potential liquidation risks.
Conclusion
Although the neutral grid is not a risk-free arbitrage tool,
But with the right strategy and fund management, it can indeed create stable cash flow in volatile markets.