Grid trading places a ladder of buy orders below the current price and sell orders above it, at fixed intervals. Each time price moves up through a level, a sell fills; each time it moves down, a buy fills. Every up-and-down oscillation completes a pair and captures the gap.
A grid bot automates the ladder — replacing filled orders so the grid persists.
What it earns
Small, frequent profits from price movement that goes nowhere. In a genuinely sideways market, a grid can complete dozens of round trips a day, each earning the interval minus fees.
The setting that matters is grid spacing relative to volatility. Too tight and fees eat the profit; too wide and price rarely crosses a level.
What it loses
Everything, eventually, if price trends. When price rises out of the grid, the bot has sold all its inventory and sits in cash watching the move. When price falls out of the grid, it has bought at every level on the way down and holds a large losing position with no sells left to trigger.
The second case is the dangerous one. A grid bot in a downtrend is a machine for averaging down with leverage.
What a grid can’t do
Tell whether the market is ranging or trending. That’s the only decision that matters for whether to run it, and the grid leaves it to you. The rule-versus-model distinction covers why this matters.