Comprehensive analysis of grid profit in the Spot Grid bot: from theory to practice

Before creating a grid bot strategy, traders need to understand how to calculate grid profit. Comprehending the composition mechanism of grid profit is crucial for developing efficient automated trading strategies. This guide will use specific examples and formula derivations to help you gain a deep understanding of grid profit, Grid APR, total P&L, and their interrelationships.

Understanding Grid Profit: Definitions and Core Concepts

Grid profit refers to the profit directly obtained through the automated buy and sell operations of a grid bot. When market prices fluctuate within a set price range, the bot automatically executes buy and sell orders at predefined grid points. Each buy-sell difference contributes to the grid profit.

For example, trader Alexey sets the following grid trading parameters:

• Trading pair: BTC/USDT
• Market price: 54,000 USDT
• Highest price: 65,000 USDT
• Lowest price: 45,000 USDT
• Number of grids: 5
• Grid interval: 4,000 USDT
• Total investment: 23,610 USDT

When the grid bot starts, the system automatically executes trades at each grid point:

Grid Profit Calculation Formula and Actual Execution Process

The calculation of grid profit follows this formula:

Grid Profit Formula = Sell Quantity × Sell Price × (1 - Fee Rate) - Buy Quantity × Buy Price

Note that after each sell operation, the system deducts spot trading fees (default 0.1%), which directly impact the final grid profit.

Using Alexey’s example: when BTC price rises from 53,000 USDT to 57,000 USDT, the bot executes the first sell:

Grid profit = 4,000 × 0.08795882 × (1 - fee) - 53,000 × 0.08795882 = 341.81 USDT

Where trading fee = (0.08795882 + 0.08787086) × 0.1% × 57,000 = 10.02 USDT

This example clearly shows that grid profit directly results from price fluctuations creating buy-sell spreads, but the final gains are reduced by trading fees.

Note: The system automatically adjusts the maximum number of grids based on the set price range to ensure that, under normal market conditions, grid profit exceeds the fees payable, resulting in net profit.

Grid APR: Standardized Annualized Return

To compare the performance of different grid bots over various time periods, the Grid APR (Annual Percentage Rate) is used. Grid APR standardizes short-term grid profit into an annualized return, making it easier for investors to evaluate strategy effectiveness.

Grid APR Calculation Formula = [(Grid profit / Investment amount) / Number of days of operation × 365] × 100%

Continuing Alexey’s example, if the grid bot runs for 24 hours:

Grid APR = [(341.81 / 23,610) / 1 × 365] × 100% = 528.42%

This figure appears very high, but it’s based on a 24-hour projection; actual results will vary depending on market volatility and trading frequency.

Total P&L: Overall Performance Including Price Movements

Many traders confuse grid profit with total P&L. Total P&L includes not only grid profit but also gains or losses from the underlying asset (e.g., BTC) price movements.

Total P&L Formula = (Underlying Token Capital + Quoted Token Capital) - Initial Investment

Using Alexey’s example: when BTC price rises to 57,000 USDT, and checking account details:

• BTC amount: 0.17574172
• USDT balance: 14,452.26

Total P&L = (57,000 × 0.17574172 + 14,452.26) - 23,610 = 859.54 USDT

This total profit includes the grid profit of 341.81 USDT and the additional gains from BTC price appreciation.

Key Point: When BTC price falls, total P&L can turn negative even if grid profit remains positive. This indicates that grid profit can be offset by a decline in the underlying asset’s value.

Overall APR: Complete Annualized Return Assessment

The overall APR reflects the total return, including grid profit and underlying asset price changes.

Overall APR Calculation Formula = [(Total P&L / Investment amount) / Number of days of operation × 365] × 100%

For a 24-hour operation:

Overall APR = [(859.54 / 23,610) / 1 × 365] × 100% = 13.29%

Note that this overall APR is much lower than the Grid APR because the underlying asset’s price movements significantly influence total returns.

Practical Application Tips and Risk Warnings

Importance of Fees: Although grid profit looks attractive, trading fees directly reduce net gains. The system intelligently adjusts grid parameters to ensure fees do not surpass expected profit, maintaining profitability.

Possibility of Negative Returns: When the underlying asset’s price drops sharply, even if the grid bot continues generating grid profit, total P&L can be negative. This underscores the market risk inherent in such strategies.

Automatic Settlement Mechanism: During operation, grid profit accumulates automatically in your bot account. When the strategy ends, all funds are automatically transferred back to your financial account.

By understanding the relationship between grid profit and total P&L, traders can better set parameters, assess risks, and optimize returns, making more effective use of automated trading tools.