Grid strategy trading is a trading method that requires users to specify a price range in which the algorithm will automatically place orders to buy low and sell high to reap profits from price fluctuations. DeGate protocol currently only supports a neutral arithmetic grid strategy where users are required to have sufficient available balance for both tokens of the trading pair, and the price differences between grids are an arithmetic distribution.
Identical to placing an order in the order book, the user's assets are non-custodial when creating a grid strategy on DeGate. The steps are as follows:
- 1.The user sets the grid strategy parameters. After confirming the creation of the grid strategy, a grid strategy will automatically be created with the asset private key and with the parameters set by the user. These parameters define how the grid orders will be placed. For each grid strategy, a minimum of two grid orders is required.
- 2.The DeGate node receives the user's signature and after successful verification, the initial grid orders will be placed based on the signature content.
- 3.Each time a grid order is matched, the circuit will also verify if the match fulfills the signature authorization.
- 4.The DeGate node will derive a new grid order according to the user's pre-authorized signature after a grid order is fully filled. This mechanism helps to automate trading for the grid strategy. For example,
- when a buy grid order is fully filled, a sell grid order with the same amount will be placed at a higher price.
- when a sell grid order is fully filled, a buy grid order will be placed with the same amount will be placed at a lower price.
- 5.The capital difference between the repeated process of the grid orders getting filled and placed is the market-making strategy to gain profits. The profits gained are not locked and are immediately credited to the available balance.
The parameters required for a grid strategy are elaborated below:
- 1.Price Range: This comprises the lowest and highest grid price which the grid strategy will be operating within. Grid orders of this grid strategy will not exceed this price range.
- 2.Initial Allocation: The initial amount of funds that are locked to run the grid strategy – the quote token is needed for the buy grid order, the base token is needed for the sell grid order.
- 3.Number of Grids: The number of grid orders that will be running concurrently. This does not distinguish if the grid order is a buy or sell. There is a minimum of 2 grids and a maximum of 255 grids for a grid strategy.
- 4.Quantity Per Grid: The buy and sell amounts are the same for each grid order.
- 5.Grid Width: An important factor affecting the profitability of the Grid Strategy. Grid width = (Higher Price - Lower Price) / Higher Price.
- 6.Expire in: The grid strategy will expire once the expiration duration is due. The orders in the grid strategy will automatically be canceled. The default duration is 180 days and can at most be 365 days.
DeGate website offers two grid strategy creation modes – Auto and Manual.
- For the auto mode, the grid strategy parameters will be automatically filled according to recent trades, the user account's available balance, the minimum order size, and other data. The user can also adjust the values of the initial allocation parameter.
- For the manual mode, users are free to adjust any parameter.
There will not be any difference in the created grid strategy between the auto and manual mode if the grid strategy parameters are the same.
Once the user has set the grid strategy parameters, before creating the grid strategy, the user can preview all the grid orders on the k-line chart.
After creating the grid strategy, users can view all detailed data including grid parameters, running grid orders, and completed grid orders. In addition, users can also perform other operations such as canceling the grid strategy, copying the grid strategy, and viewing it visually on the chart.
Users can cancel a running grid strategy at any point in time which will cancel all the open grid orders and all the locked assets will become available immediately. On top of this, users can also perform an on-chain grid cancellation operation for grid strategies that have already been canceled. As it is an on-chain transaction, the user will need to pay for the gas fee. The more grid orders, the higher the gas fee will be.
Users can copy an ended grid strategy which will automatically populate the parameters to the create grid strategy interface, facilitating a quick grid strategy creation experience.
Users can also view the grid strategy on the chart which illustrates the recent trades and grid orders.
When DeGate's liquidity mining program starts, users can only participate in the mining via grid strategy.