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Dynamic Grid Trading and Adaptive Grid Resets

Article arXiv papers · Author: Kai-Yuan Chen et al.
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Summary

The document compares traditional grid trading with a dynamic approach for cryptocurrency markets. It first analyzes the expected value of a conventional grid under simple assumptions, concluding that its expected return is approximately zero. It then introduces Dynamic Grid-based Trading, which resets grid positions in response to changing market conditions. The central idea is to adapt the grid rather than leave its positions fixed as prices move.

The stated evidence is a backtest on minute-level Bitcoin and Ethereum data from January 2021 through July 2024. The document reports that the dynamic strategy outperformed both a traditional grid and buy-and-hold on internal rate of return and risk control. It provides no details here about the reset rules, fee and slippage assumptions, parameter selection, or statistical robustness. The reported results therefore describe the tested historical period and do not establish performance in other markets or future conditions.

Key ideas

  • A traditional grid strategy has approximately zero expected return under the document’s simple assumptions.
  • Dynamic Grid-based Trading adapts by resetting grid positions as market conditions change.
  • The reported comparison uses minute-level Bitcoin and Ethereum data from January 2021 through July 2024.
  • The document reports stronger internal rate of return and risk control than traditional grid trading and buy-and-hold.

Tags

CryptoGrid tradingBacktestingRisk management
Full text
# Dynamic Grid Trading Strategy: From Zero Expectation to Market Outperformance


# Dynamic Grid Trading Strategy: From Zero Expectation to Market Outperformance









We propose a profitable trading strategy for the cryptocurrency market based on grid trading. Starting with an analysis of the expected value of the traditional grid strategy, we show that under simple assumptions, its expected return is essentially zero. We then introduce a novel Dynamic Grid-based Trading (DGT) strategy that adapts to market conditions by dynamically resetting grid positions. Our backtesting results using minute-level data from Bitcoin and Ethereum between January 2021 and July 2024 demonstrate that the DGT strategy significantly outperforms both the traditional grid and buy-and-hold strategies in terms of internal rate of return and risk control.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.