GRID bots typically operate by placing a series of buy and sell orders at predetermined price intervals within a trading range. As the market price fluctuates, these bots execute trades, capitalizing on small price movements. However, during a market pump or dump, when prices rapidly rise or fall, traditional GRID strategies can become less effective, potentially leading to significant losses. The Pump Protection feature addresses this issue by monitoring for abnormal price changes that deviate from the expected trading range. Here’s the step-by-step process:
Monitoring Price Movements: The feature continuously analyzes the market for acceleration in price movements that go against the bot’s current position.
Halting Trades: If a sudden price pump occurs and the market price starts moving opposite to the bot’s positioned grid, Pump Protection automatically stops the execution of further trades. This halt prevents the bot from executing unfavorable trades that could lead to losses.
Assessing Market Conditions: During the halt, the system keeps monitoring the market conditions. This pause allows the bot to avoid making trades during periods of high volatility, where the risk is significantly higher.
Resuming Operations: Once the market stabilizes and volatility decreases to safer levels, the GRID bot resumes its operation, executing trades at each predefined grid level as usual.
What if I use Hedge Grid?
For the Hedge Grid, this feature functions in exactly the same way. When price volatility occurs, one side of your trades will be automatically paused to reduce unrealized losses, while the other side continues its operation as normal.
Execution Through Market and Limit Orders
To implement Pump Protection effectively, all entry orders under this feature are executed through market orders by default, but you can switch it to limit orders as well. This approach ensures that trades are executed immediately at the best available market price once the bot resumes operation, helping to capture the appropriate trading levels quickly and efficiently, thus minimizing slippage during high volatility.