The Overbit Ping Pong Bot is an innovative style of grid trading that benefits most when markets are moving sideways. When you study a particular market that has been trending sideways for a while and waiting to break out in a particular direction, it is often better to assume it’s going to trend sideways until you get a breakout confirmation. By running a ping pong bot, you can benefit from that continued sideways movement and make profits.
The basic concept of a Ping Pong bot
Before starting, the bot requires you to set a grid step % and the number of grid levels. Let’s say you set the grid step to 1% and you have set the grid levels to 10.
The ping pong bot starts off by placing an equal number of buy and sell limit orders below and above the current market price. In this case, it would be 5 buy orders and 5 sell orders. These are placed at equal distances apart (1%) as configured in the grid step parameter.
If the market moves down by 1% the first buy order will be executed. The bot will detect that a buy order has been executed and will place a new sell order 1% above the current market price. You will notice that we now have 4 remaining buy orders and 6 sell orders.
Let’s say the market moves down by another 1% and executes another buy order. The bot will again detect this movement and place another sell order 1% above the current price. This will leave us with 3 remaining buy orders and 7 sell orders.
Now if the market moves back up again by 1%, that newest sell order would be executed first and we can collect some profit on our position. The bot will again detect that a sell order was just executed therefore it would quickly add a buy order where it was before. A further upward movement by 1% would execute another sell order allowing the trader to collect more profit.
In this scenario, the market moved down by 2% and moved up by the same amount. This is a basic sideways movement that could happen in a short space of time allowing the trader to benefit and capture some profit.
The market could have also started by moving upwards first triggering 2 sell orders and then downwards by the same amount, therefore triggering 2 buy orders. A similar profit would have been captured.
Now let’s explore what other scenarios could happen with a ping pong bot.
Market moves in a single direction executing 5 orders
If the market continues to move in one direction (let’s say it moves down by 5%), and all the buy limit orders are hit, then you will see a grid with 10 sell orders. Once the first 5 sell orders are executed, the bot will have captured a profit on all 5 movements.
Market trends entirely outside the grid
Let’s say the market goes down by more than 5% and trends entirely outside the grid, it would have executed all 5 buy orders and is now sitting at 6% below the starting price. In this case, as the maximum number of buy orders have been executed, the bot will not increase its position size. Instead, the grid of sell orders will shift down by 1% each time the current price is more than 2% away from the bottom sell line. Therefore, one sell order from the top will be moved to the bottom of the grid.
Please note that each time there is a shift in the grid, the trader will be taking a loss on that first position-reducing order.
When you create the ping pong bot, there are several important parameters to configure:
The distance between each limit order (grid step)
The number of limit orders to create at any one time (grid levels)
The overall size of your investment
The leverage you wish to use
A stoploss for the overall bot
The Overbit ping pong bot can be backtested on any market and on any given time period. While past results are not a prediction of future results, backtesting is extremely important to help a trader determine how such a configuration would have resulted in certain market conditions.