Free Profit (Grid bots)

This article aims to clarify the "Free Profit" concept in grid bots, a crucial aspect that can significantly impact your trading strategy and outcomes.

What is Free Profit in Grid Bots?

Free Profit refers to the portion of profit generated by a grid bot that is readily available in your balance and is not earmarked for re-creating a grid order. This distinction is vital because, in specific scenarios, a part of your profit needs to be reinvested to maintain or establish new grid orders.

Example Scenario: Long ETH Grid Bot

 To illustrate, let's consider a simple long ETH grid bot scenario (for simplicity, we will ignore exchange fees):

• Initial Setup: On start, the bot makes an initial purchase of 4 ETH at 2000 USDT / ETH and sets up 4 sell orders of 1 ETH each at 2250, 2500, 2750, and 3000 USDT.
• First Price Hit: As the price hits 2250 USDT, your bot registers a profit of 250 USDT and uses 2000 USDT to place a new buy order below the current price.
  • Total Profit: 250 USDT
  • Free Profit: 250 USDT
• Second Price Hit: When the price reaches 2500 USDT, the bot registers a 500 USDT profit. However, it needs to recreate the lower buy order at 2250 USDT. Hence, it must use 250 USDT of the generated profit to recreate it.
  • Total Profit: 750 USDT
  • Free Profit: 500 USDT

In this example, the "Free Profit" after the second price hit is 500 USDT, the amount available in your exchange balance that is not required to maintain the grid strategy.

Importance of Understanding Free Profit

1. Risk Management: Knowing your free profit helps in effective risk management. It lets you understand how much of your earnings are at risk if market conditions change.
2. Reinvestment Strategies: Free profit can be reinvested in other trading strategies or withdrawn, providing flexibility in managing your portfolio.
3. Performance Tracking: Distinguishing between total profit and free profit gives a clearer picture of your grid bot's performance.

Conclusion

Understanding the concept of free profit in grid bots is crucial for effective trading on Gainium. It not only aids in better financial management but also in strategizing your trading approach. As you navigate the world of cryptocurrency trading, remember that knowledge is power, and Gainium is here to empower your trading journey.