Why Grid Trading Shines in Volatile Markets (A → B → C Example Explained)

[btschwertfeger]

Background

I have that feeling to make a post about this topic, since I felt myself falling into thoughts like "Ahh the prices go down, that does not look good.", "Should I add more funds to the infinity-grid instances or wait for the markets to recover?", ... due to the recent downward market movements.

Disclaimer

We should look at the things rational and think this through, but first of all: the disclaimer of the README.md of this repository also counts for the discussions. Nobody should be encouraged to take actions purely on statements and comments made in this context. This is no financial advice.

Why Grid Trading Shines in Volatile Markets

So lets dive into why grid trading is great in volatile markets and continuing it even in falling markets like the current one is not a bad thing at all using the Bitcoin/US Dollar trading pair.

I've added a chart to illustrate three key phases of Bitcoin's price behavior:

• (A): A wide range where the price trades relatively high
• (B): A breakdown where price trades below the previous range
• (C): A new upward phase above the (B) range, similar or even higher than (A)

These phases are perfect to explain why grid trading is so effective and why I built the infinity-grid trading bot.

1. You cannot time the market

   Most people think they can buy the low and sell the high. Reality:

   • You rarely catch the bottom.
   • Even if you do, catching the top is harder.
   • And re-entering a trend after selling "perfectly" is even harder.

   Grid trading solves this because it doesn't try to predict anything - It just buys and sells whenever price crosses predefined levels.

2. Grid trading earns continuously, even when the balance looks negative

   Taking the example of the infinity-grid, configured with the GridHODL strategy, an interval of 2% and an amount per grid of 50 USD. Each buy generates small leftover amounts ("dust") of Bitcoin, which is pure realized profit as soon as the corresponding sell order was executed.

   As long as the price moves up and downwards, the grid keeps earning. Even if your unrealized PnL is negative, the realized dust keeps growing.

   This is why the grid performs well in volatile market situations.

3. Tax advantage: Selling high-priced coins first

   When prices drop from a high range (A → B), the infinity-grid sells coins that were bought at higher prices earlier due to the FIFO principle. This creates tax-free profit in many jurisdictions, because the price drop can make the sale profitable without triggering taxable gains.

   So falling markets are not a reason to pause grid trading. They're an opportunity to accumulate lower-priced inventory while realizing tax-free gains from earlier cycles.

4. Price cycles lower the average cost and increase long-term profit

   A long sequence of high-price trades (A) followed by low-price trades (B) gradually reduces the average cost of the accumulated dust. When the market later shifts into a rising phase (C), the value of that accumulated dust explodes.

   It's basically "buy low, sell high" executed automatically, without the psychological stress of timing entries.

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"Conclusion"

Grid trading is not magic. It's a systematic way to benefit from the one thing all markets do: move.

This A → B → C market structure happens over and over. The grid turns those movements into steady profit, tax advantages, and long-term accumulation.

If you have ideas, want to experiment, or want to contribute improvements to the infinity-grid, feel free to join the discussion. Contributions, questions, and alternative ideas are all welcome!