A few weeks ago I started playing around with the (fairly new) Grid Trading Bot on KuCoin, and it's been a pretty awesome experience. I want to share my insights here so anyone can get going with that bot immediately.

If you're not registered with KuCoin and you'd like to support me in writing this piece (and future one's), please use my KuCoin referral link when signing up.

If you're not sure about KuCoin itself, I'll put a little section about it at the bottom of the post, so folks who are more interested in the bot can dive right into it.

A bot offered by an exchange, hm?

At first it may sound weird that an exchange would offer a trading bot themselves. It doesn't seem like this is fair because "bots exploit humans", but rest assured it's not like that - it's literally just automating human work. And it's actually better if it's offered by the exchange itself, because every single user of the exchange (given they use the mobile app) can use it - for free (usual trading fees apply).

Of course KuCoin is benefitting from your use of the bot, because you're effectively trading more, and on top of that, you're providing liquidity into KuCoin's markets. So I view this as kind of a win-win, and if you're a holder of KCS tokens (and thereby participating in the trading fee profits of KuCoin), you might actually be double-winning ;-)

What the bot does

The bot I'm talking about is a grid trading bot. Grid trading means that you're placing a bunch of buy and sell orders at different prices into a market to capture (and benefit from) the volatility of the given market. One simple example:

• Assume BTC/USDT is at 35000
• You place a buy order of 1 BTC at 34900, and one at 34800
• You place sell orders at 35100 and at 35200
• If BTC moves down to 34900, your first buy order gets matched; you place another sell order at 35100
• If BTC moves down to 34800, your second buy order gets matched and you place a sell order at 35000
• Imagine BTC moves up to 35100 and then back to 35000
• This means that your sell orders at 35000 and 35100 got matched
• Now you've bought BTC at 34800 and 34900, and sold at 35000 and 35100, so you've made 500 USDT (including the 100 you made from the initial sell placed at 35100) in those trades, despite the price of BTC ending up at the same level

As you can see, there is no magic involved in this kind of grid trading, and also no shady activities. It's merely you placing orders at different levels so you don't need to be trading actively all the time.

The KuCoin Grid Trading Bot automates the continuous placement of these orders for you.

How to access the bot

In order to set the bot up, you need to sign up with KuCoin if you haven't yet, and the download the KuCoin app. The bot can be accessed through the "Trading Bot" button on the home screen of the app. There's also the DCA bot (for Dollar-Cost Averaging), and we can discuss that another time.

All funds used for the bot first need to be deposited into your KuCoin trading account. For accounting reasons, I always choose USDT as the starting currency for my bots, but feel free to use the "target" currency if that feels better for you.

At the time of writing, you can run up to 10 grid trading bots on KuCoin simultaneously, which will become relevant sooner than you might think.

The minimum requirement you need to put into each bot varies a little bit, but in general it's very low, between ~6 and ~30 USDT.

Setting the bot up

Setting the bot up is actually very easy. I recommend setting your first bot up with the "AI" parameters. I don't believe there's any AI or even machine learning involved in comupting them, but whatever, it makes it really easy to set it up. Choose a currency pair from the dropdown, and make sure you choose a pair with a rather high volatility (~10% and up) for good results.

Choose the amount of USDT you want to put into the bot, press Create, and off you go.

Once you've had that bot running for a day (or a few days), you'll get a feeling of what you can expect from such a bot and where you might want to experiment, so you'll want to set up bots using "Customized Parameters". This doesn't make it a lot more difficult, it basically just lets you choose the price range within which the bot should place orders, and the number of orders it's supposed to place - evenly - within this range.

Example:
If you choose a range of 30000-40000 for BTC/USDT and the number of placed orders to be 10, your orders will be placed with a difference of 1000 USDT between each others, at 30000, 31000, 32000, etc.

Orders above the current market price will be placed as sell orders (and the respective amount of currency will be bought from the market upon setup), and orders below the current market price will be placed as buy orders.

As soon as your orders start to get matched, new orders will be placed at the same price levels. It helps a lot to click on "Order Details" on one of your running bots to check what kinds of orders it's actually placing.

Of course, your total invested money will be divided across all the orders, so the higher the number of orders, the smaller the individual order size.

What the bot does not

The bots (and grid trading in general) are giving you an opportunity to benefit from volatility in markets otherwise moving more or less sideways. If you think that BTC will be caught inside the range between 35000 and 40000 for a few days or weeks, this can be a great opportunity.

Grid trading, however, is not meant for participating in the upside potential of upwards trends. If you've set the range to 35-40k, your last BTC will be sold at 40k, so if the price moves beyond that, you're not participating in that movement. On the other hand, if the price goes down a lot, you will have bought the token and holding it until the price moves back into your range, or you stop the bot.

The bot also does not change ranges, so if it moves out of your range or if the volatility goes down (so you're not making enough profit), it might be time to stop the bot, and maybe set up another one.

How much you can expect to make

My experience consists of only a few weeks, and we've been mostly in bull markets at high volatility, so it's unclear whether we can expect to make similar profits from grid trading as I have. It also strongly depends on the parameters you're using in combination with the market conditions, so make sure you play around, and keep improving your strategies. High-volatility markets with big price jumps will generally be tackled better by bots with fewer, bigger steps, because your individual trades will be making more percentual profit.

On average, I've been making between 2% and 10% per week grid profit, which sometimes got set off by losses in the traded asset itself. Overall, however, I've been making healthy profits on pretty much all bots, even though holding the asset itself might've been even better. But again, if you're looking to benefit from the price development of an asset, you'd better invest in that asset itself.

About KuCoin

KuCoin is an exchange officially incorporated in the Seychelles and it's generally very international, including support or a lot of smaller and otherwise less listed assets. I personally started trading there when I wanted to buy some WXT, which, back then, wasn't yet listed on a lot of large exchanges.

KuCoin is currently listed as a top 10 exchange according to CoinMarketCap. They have their own exchange token called KCS which offers you daily rewards based on the total trading fees made by the platform.

I know there's been a bit of bad news about KuCoin in 2020 when it comes to hacks and dealing with them. However, I've personally had overall good experiences with the exchange and the services they're offering around the core exchange, be it Pool-X (the staking service), Futures trading or the discussed bots.

Conclusion

I hope I could make your start with the KuCoin grid trading bot a bit easier and you'll enjoy using the bot, as well as make awesome profits with it. As usual, use the bot at your own risk and make sure you don't invest money that you can't afford to lose.