In turkish his sobriquet is Yavuz Sultan Selim. Possible translations for yavuz are "ferocious" "resolute" or "inflexible". If we look at google ngram we can see that in English, "the Grim" sobriquet gains currency in the 1880s, before which he was just known as Selim I.

If we look at Oxford English Dictionary, they offer the following definitions:

1 a. Of persons or animals: Fierce, cruel, savage or harsh in disposition or action. Also, in weaker sense, daring, determined, bold. Occasionally const. with, against, or with dat. (Now merged in sense A. 4.)

...

4 a. Formidable in appearance or demeanour; of stern, forbidding or harsh aspect, suggesting a cruel or unbending disposition. †Also, in weaker sense, hard-featured, ugly.

So, in 1880 when the English language sobriquet gained attention, readers would have understood it to accurately convey the sense of ferocious, resolute, or inflexible-ness. However, usage has changed, and it is less common for readers to understand "grim" to have those connotations.