DCA vs Grid Bot

TradeSanta offers two kinds of trading bots: Grid and DCA bots. Let’s have a look how they differ and which bot to choose. In this article we’ll explain it using a long strategy as an example. In long strategy the bot buys the coins in order to sell when the price goes up to get the profit.

Dollar-Cost-Averaging

In case of dollar cost averaging (DCA) the bot places the first buy order followed by extra (buy) orders if the price goes into the opposite direction of the strategy chosen. Only one take profit order is placed for all the volume purchased before. The price of take profit and the volume are recalculated with every new buy order. The crypto bot takes the average buying price, adds TP percentage to it, and places the Sell order for all parameters.

Let’s say we have a USDT BTC bot with 4 extra orders with the step of EO of 1% and Take profit at 1%, the volumes of each order 1000 USDT and starting price 10 000 USDT.

The first buy order would be at the 10000 USDT mark with a sell (TakeProfit) order of 0.1 BTC at 10100 BTCUSDT mark. Thus, you will gain a profit of 10 USDT. However, if the price goes down to 9500, the bot will execute all Extra orders and will put a single Take profit for X volume at X price for all the orders bought.

Grid bot

The Grid bot places the first buy order and buys more coins with extra orders if the price goes down, just like DCA. The main difference is that the Grid trading bot places Sell order for each order instead of one for all purchases in DCA. So, if you have a bot with 10 orders (1 first order and 9 extra orders) and the price goes down and all the Extra Orders get executed, the bot will place 10 separate sell orders for each buy order you made with the corresponding TakeProfit on each order.

If a bot executes first buy order at the price of 10000 USDT for BTC, it places the first sell order at 10100 Provided that the bot has TP set to 1%. Let’s say the Step of Extra Order is 1%. So if the price goes down to 9900 without reaching the first Take Profit mark, the bot will buy coins and place a Sell order at the level of 9999 USDT. Thus, the bot will have 2 buy orders executed, and 2 separate sell orders at the price levels of 10100 and 9999 and so on.

Is there something else I should consider?

Both bots have their own strengths and weaknesses.

DCA's advantage is that it will most likely close a deal sooner if bought made multiple buy orders, than a grid bot. So the coin holding time will be less and you can reinvest the money faster. The extra order will help average the price and the last sell order will need to reach a lower price level unlike Grid bot.

Grid bot takes advantage of price fluctuations that occur when the price goes down. If your starting price has been let’s say 10000. Then it dropped and stabilized in the range between 9000 and 9100. The bot will pause sell and buy orders within this range making profit while the price is still far from executing the very first Sell order. If you’ve caught the range and it’s covered by your Extra Order, the bot won’t seize capitalizing on it.