Good afternoon friends!
As you know, there is a bearish trend in the cryptocurrency market today. The head of the Binance exchange, Zhao Changpeng, has already spoken on this topic. He is convinced that the fall in prices will soon give way to a bullish trend. Other leaders of the cryptocurrency market share the same opinion..
Thomas Lee Agency Fundstrat Global Advisor in his research predicts the growth of bitcoin by the end of this year to $ 36,000. And John McAfee, an investor planning to run for the presidency of the United States in 2020, predicts the growth of BTC in 2021 to $ 1 million.
In the meantime, cryptocurrency traders are working in a falling market. They have a lot of opportunities here, compared to long-term investors who, in order to make money, must be guided by long-term changes in the direction of price movement. Most often this is a long position..
Crypto traders, on the other hand, can consistently make a profit on any change in price direction. Shorting cryptocurrencies helps them to make money on the market fall.
Today we will talk in detail about this, as well as figure out which tools help traders to open short positions when trading on the Binance cryptocurrency exchange. After all, there is simply no such opportunity on the site..
- 1 Cryptocurrency bearish position or shorting
- 2 What is 3commas shortbot?
- 3 What to do if a bearish trend turns into a bullish one?
- 4 Setting up shortbots
- 5 Conditions for starting a deal
- 6 Let’s sum up
Cryptocurrency bearish position or shorting
A bearish strategy, or shorting, involves a trader entering a short position (a sell order), assuming that the asset’s price will fall further. Stock traders who prefer to make money on falling prices are called bears, and their trading is a bearish or bearish strategy..
In the classical sense – when the provisions of this strategy are applicable to any exchange – shorting is the following sequence of stages:
- a trader borrows digital currency from an exchange or other users. In the previous article, we talked about this and now we know that such a trade is called marginal;
- he opens a short position (short position), placing an order to sell this currency;
- waits for the asset price to drop to the expected level and buys the currency;
- returns the loan to the exchange;
- the earned difference is the trader’s profit.
In the future, we will analyze this scheme using the example of specific numbers and it will become clearer. Today, many sites provide traders with the opportunity to trade with leverage and offer a certain amount of digital coins for this to open short positions in the cryptocurrency market..
But not all exchanges offer margin trading. It is not on Binance, a trader simply cannot go short. Does this mean that it is impossible to make money on a bearish strategy on this site? Not at all. For this we will use the tools that the 3commas service offers us, namely the efficient Short-bot algorithm.
It was developed by the 3commas programmers so that it can be used to work with those coins that show a serious disadvantage..
What is 3commas shortbot?
All 3commas trading bots successfully work with the API of the Binance exchange, new exchanges are connected, but it all depends on their functionality: whether their capabilities allow it, so if you have stuck coins on one or another exchange, check if they are traded on Binance, and If yes – feel free to translate there.
Algorithm short-bot works as follows: for example, you have 100 coins of some kind of digital currency, which, for convenience of calculations, conventionally costs $ 100 per coin.
The bot sells 10 of them for $ 100. After that, the rate goes down, at some point (for example, when the rate reaches the price of $ 9 per coin), the bot buys back the 10th moment of the same currency, but for $ 90. Thus, you get 10 dollars of profit when the rate falls, and the number of coins you have remains unchanged..
This is how it looks like on the TradingView chart on the Binance exchange:
Having selected the currency pair you are interested in, you can mark the purchase price on the chart with a line. The drawdown of the currency will be clearly visible on the chart. This is the range from the purchase price to the current price..
Next, you need to launch the short bot. And he will sell 10 coins for the price marked with a pink line. All numbers are specified in the short bot settings. We will talk about this a little later..
Simultaneously with the sale, an order is placed to buy 10 coins below the selling price. That is, if it drops to this order, then the difference between the selling price and the price of the new purchase will be the trader’s profit. And the number of coins will remain unchanged.
Simultaneously with the start order, the bot places safety orders.
This is a protection against slippage in the event of a sharp candle so that orders are filled evenly without jumps.
However, I do not recommend overusing them and recommend placing 3, maximum 4 safety orders. Moreover, with such a step so that the coverage of the drawdown was at least 14%
If the price went up and reached the first safety order, 10 more coins will be sold (this is an example, you specify the amount in the order settings), the starting price will be averaged, and the take-profit order will move higher, keeping the profit percentage set by us in the settings.
If the price goes even higher, then the second safety order is triggered, another 10 coins are sold, the starting sell price is averaged again and the take profit order is again pulled higher. Thus, we get a profit in any case. In the event of an increase in the coin rate, the bot each time fixes a part of the profit due to insurance orders and gives positions to grow, and in the event of a fall, buys the position and averages the deal, making your position more profitable. So, if the price reverses, then 30 coins will be bought at a lower price at the take-profit order level, and we will receive our profit percentage.
Of course, you can adjust the number of coins sold and the percentage of profit for fixing a profit to your strategy or to the instrument on which you want to use the bot..
If something remains unclear, then you can learn more about the work process and the profit received when trading short bots in the 3commas knowledge base.
What to do if a bearish trend turns into a bullish one?
If the price continues to move up to follow the trend, we stop the short bot when it has fully activated all insurance orders. After that, using a growing coin, you can launch a simple bot that will scalp in case of growth and averaged in case of a fall, or use the tool SmartTrade, thanks to which you can build a smart long structure using a whole ladder of orders and using trailing to buy the asset of interest.
If you have not used the short bot from the service yet 3commas – I recommend to try. It is a very effective tool for trading bearish trends. After registration, the service provides an opportunity to test it for 3 days absolutely is free. During this period, you will have activated account PRO, and all paid features will be available.
If you enjoy using this tool, then in the section “Subscription»You can renew your professional account.
Before starting work, you can go to “Settings“And include the Russian language there, if necessary, Push notifications in the browser, as well as connect your Telegram here so that you receive notifications about transactions. For this in the column Telegram Bot it is necessary to tick “Completion message“.
Go to the section “My bots“. The service allows you to display shortbots, simple bots, compound bots and compound shortbots. Since our market is falling, we will not dwell on other types in detail, but we will talk in detail about setting up short bots.
Setting up shortbots
So, press the button “Short bot“. To create a bot, you must have funded your account on Binance and purchased the necessary coins, as well as some BNB coins (Binance Coin). In detail about what this cryptocurrency is and what it is needed for, I have already dwelt in previous articles. Today I will say briefly that it will be required to save money and get a discount on the commission for transactions in the amount of 25%.
We enter the name of the bot, it can be anything, but usually its type is indicated in the name, i.e. short, so that when you have a lot of bots not to confuse them, and the currency in which it will work. For example, let’s take the most popular pair – BTCUSDT.
After that, go to the window “Assistant“.
The top amount is your balance on the exchange, the number of coins you have. If you have recently replenished it, then you can update this figure.
Under it is indicated the maximum amount of funds used by the bot at the current rate in coins and the percentage of funds that the bot can use. However, first of all, you should be concerned about two other indicators, these are maximum price deviation of the last safety order and the percentage of funds used by the bot. If the latter exceeds 100%, i.e. the amount that you have on deposit – you need to adjust the settings so that they are less than 100%, and preferably, in the region of 70-80%, no more.
In general, the following rule should apply to a short bot:
the percentage of funds used by the bot = 100% – maximum price deviation of the last safety order.
In order to achieve the desired value the percentage of funds used by the bot and complete the settings, you need to configure 8 parameters:
1.Maximum number of safety orders. The number of orders is selected individually, depending on the balance and strategy. If it allows, then at least 100 safety orders can be placed. For a short bot, I prefer to bet no more than 4.
2. The volume of the start and safety order also depends on the deposit, we will reduce it three times: from 30 to 10 USDT. Moreover, 10 USD is the minimum allowable value. If you set this value, then the amount of funds used by the bot will decrease by three times. A value of 10 USDT is optimal for a deposit up to $ 1000.
3. Value of target profitability you can bet from 1 to 2%. I usually bet 1.5%. Also, some traders prefer to set this value less: from 0.5 to 0.8%. It is important to understand here: the lower this value, the faster the order will be executed, therefore, the greater the turnover on one side and the greater the commission expense on the other.
4. Calculation of profitability. If we set aside “as a percentage of the base order”, then the above percentage you will receive from the start order. It doesn’t matter how many safety orders you have. And in case the calculation is carried out from total volume, then all safety orders are summed up with the starting. When exactly from this amount the price will deviate by a percentage of the target profitability, in this case we have set 1.5%, then the profit will be fixed.
Deals as a percentage of the total volume take longer to execute, but more profit. Therefore, it’s up to you to decide. However, my personal experience shows that this option is more preferable..
5. The number of simultaneously active safety orders. The default is one, but we will set the maximum value to catch the ticker momentum and recoup on a pullback.
6. Price deviation for placing a safety order (% of the value of the initial order) I consider this indicator to be one of the most important. The fact is that if you set the deviation percentage too small, then the drawdown coverage percentage – the maximum price deviation – with a small number of insurance orders will be very small, and therefore there is a high risk that in the event of a strong trend reversal, the market will collect all your insurance orders. and will not allow you to take profit. Therefore, when setting this indicator, you must first of all be guided by the final figure in the Assistant’s calculator according to the indicator “Maximum deviation of the price of the last safety order”. For a short bot, it is desirable that this value is not less than 20%
7. Step multiplier Again, we regulate safety orders so that the final “Maximum deviation of the price of the last safety order” is more than 20%. I like to work in 1.5 to 3% increments for a short bot
8. The multiplier of the volume of safety orders, perhaps, has the greatest influence on the final indicator. The percentage of funds used by the bot. I prefer to set this multiplier in the region of 1.5 to 3. As I said, you can bet more if you have a large amount of purchased coins (balance) and less if there are not many coins. Thus, each new placed safety order will be 50-200% more than the previous one. This will help you close deals faster and get profit..
A screenshot of an example of these settings is shown in the figure below.
These settings mean that every 4% of the price change in the opposite direction, a safety order will be opened, the price will be averaged, and when it drops down by 1.5% of the total volume, a buyout will occur, which literally means the following: we bought our cue ball 1.5% cheaper than previously sold.
Once again, I want to draw your attention to the fact that the purpose of this strategy is to protect the deposit in the bear market. Thanks to these settings, your position will be calibrated in the investment portfolio depending on market trends, i.e. on a bearish trend, this bot will allow you to avoid strong losses without fixing a loss and will allow you to save a position for a bullish reversal.
Conditions for starting a deal
I set here the item “open a deal as soon as possible.” This, of course, is dangerous if the coin changes its movement abruptly, for example, it collapses sharply, and the bot begins to actively buy it. But, as I said, it is better to work with proven coins, in which case it is not so scary. If in doubt, it is better to indicate TradingView in this paragraph.
In the time selection point, set 1 hour, and in the next line – Sell or Strong Sell.
Click “Create Robot” and activate it. Then you can watch the bot’s work and how it places orders. After you try to create a bot with these settings, you can experiment with them. You can also go to the “Bots” section and see here the best bots for the last 24 hours and copy the settings.
Let’s sum up
With a bearish strategy in the cryptocurrency market, as well as with any other, one should be very careful. It can bring both profit in a falling market and protect your investments, or without the necessary knowledge, lead to losses..
In the following posts, we will talk about the BitMex exchange. Traditionally, we will consider the most interesting opportunities and tools for a trader. Stay with us! See you soon!
Good luck and good profits!