The Veles bot can work either only in Long or only in Short – this is prescribed in its settings. There are currently no neutral bots on the Veles platform.
But you can simultaneously launch two bots for one coin in opposite directions – one in Long, the second in Short, and they will not interfere with each other. For Futures, Hedge Mode must be enabled on this trading account, and on the Spot, you need to make sure that the bot deposits do not overlap (that is, so that the bot in Short does not sell the coin that the bot bought for itself in Long).
Long is a trading algorithm when a trader purchases an asset (a commodity, stock, bond, derivative futures contract or other financial instrument) expecting that the price of this asset will rise.
Example 1.
On the Futures trading account of the cryptocurrency exchange, we open a Long position, that is, we purchase contracts (= obligations) to buy a coin at the current market price or at a chosen fixed price. Then we observe the price of the coin. We will need to sell these purchase contracts, but at a coin price higher than when opening a position. The number of coins in contracts when buying and selling them should be the same – this way our position is completely closed, all obligations are repaid. The difference between the opening and closing price of a position will be our trading result.
When trading futures, we do not own the coin itself, we temporarily own only contracts to buy or sell this coin.
There is a risk that if the price of the coin moves down too much (not rises as we need it to), the exchange will launch the liquidation process – it will forcibly sell our contracts at a loss, and we will lose all the funds invested in this deal irrevocably. This is called “liquidation”, the rules of procedure are described in the exchange’s documentation. The risk of liquidation and the amount of losses can be approximately determined in advance, and this should always be done when preparing to open a deal.
Example 2.
On the Spot trading account of the cryptocurrency exchange, we buy a coin at the current market price or a fixed price chosen by us. Then we observe the price of the coin. If the price has increased by the percentage we need, we sell the coin, and the difference between the purchase amount and the sale amount is our trading result.
If the price has fallen, contrary to expectations, we still own the coin, which does not make sense to sell yet, since we will get less for it than we spent on the purchase. There is no risk of liquidation on the Spot. We can wait for the right price as long as it takes. In addition, the coin can be withdrawn to another wallet, to another exchange, or used in a short bot (we will tell you more below).
Short is a trading algorithm in which a trader expects a decrease in the price of an asset (commodity, currency, etc.). In this case, you can use a derivative financial instrument – a futures contract to sell an asset at the current high price, in order to then purchase a contract to buy it at a low price and thus make a profit. Or, having an asset available that is subject to price fluctuations (such as cryptocurrency), you can sell it on the Spot market at a local price increasing and buy it back at decreasings, collecting the difference as your profit.
Example 1.
On the Futures trading account of the cryptocurrency exchange, we open a Short position, that is, we purchase contracts to sell a coin at the current market price or at a fixed price chosen by us. Then we observe the price of the coin. We will need to sell these contracts, but at a coin price lower than when opening a position. The number of coins in contracts when buying and selling them should be the same – this way our position is completely closed, all obligations are repaid. The difference between the opening and closing price of a position will be our trading result.
There is a risk that if the price of the coin moves up too much (and did not fall, as we expected), the exchange will launch the liquidation process – it will forcibly sell our contracts at a loss, and we will lose all the funds invested in this transaction irrevocably.
Example 2.
We posess some cryptocurrency. On the Spot trading account of the cryptocurrency exchange, we sell this coin at the current market price or at a fixed price chosen by us. Let’s say you sold 100 Coins for 100 USDT. Then we observe the price of the coin. If the price has fallen by the percentage we need, we buy the same amount of coin, 100 Coin, but for 95 USDT.
The difference of 5 USDT between the purchase amount and the sale amount is our trading result, profit, fixed in the stablecoin.
Either we buy a coin for the entire amount in stablecoins, and in this case we get more coins for the same money than we had before entering the deal – the coin amount grows in our assets, we “farm” it, get our profit in the coins.
If the price has increased, instead of falling, we still own a stablecoin (or another currency that was in your trading pair), which was bailed out for the sale of the coin. We can wait for the right price as long as it takes.
There is a risk that the price will never return to the desired level to allow us to redeem the coin at a profit. Therefore, when deciding to trade a coin in short, you must first know and take into account the average purchase price of this coin in order not to remain at a loss.
Important! Short trading is much more risky than long trading. Therefore, short-bots should be designed as safe as possible (have sufficient % overlap, high % Martingale, logarithmic distribution <1, and carefully select entry points to the deal). It is often necessary to select a grid specifically for a specific coin – what worked on one currency does not give a good result on another.
Farming coins with a Short-bot
When trading on a Spot, there is an interesting opportunity – to launch a Short-bot with the coin that was bought by the Long-bot, which came into a drawdown (in the invest), and which has not even been stopped yet. This is not always possible, the options are described below.
1. If a long bot closes a trade with a simple profit, then its entire coin has already been reserved in the Take Profit order, and it will not be available for the Short bot, you simply will not see it in the BALANCE field.
2. If the Long bot closes the deal with multi-takes, then it has reserved the volume of the first Take Profit order, and the rest of the coin can be given to the Short bot.
3. If the long bot exits the deal at the signal of the indicator, then you can give the Short bot the entire volume of its coins, since an exit order is not created in advance (which means that there is no reservation, the entire coin lies on the balance of the trading account).
We remind you that the grid and everything else must be selected very carefully for the Short-bot, each coin will have its own overlap, logarithm, Martingale %, it must be tested many times. If you use a Stop Loss unsuccessfully in a Short-bot, then it will bring more losses than new coins. And if you do not use a Stop Loss, then a conflict may arise when the Short-bot sells a coin at a price rise, and at the same time the Long-bot tries to sell the same amount again.
In such a situation, it will be possible to leave the Long-bot in the error status, and press “Stop” on the Short-bot (do not cancel the deal!) – let the deal be completed and the profit fixed. However, it may take a long time to wait for the price to fall, the drawdown in the market. And then, when the Short-bot successfully fixes the profit and stops, restart the Long-bot and restart its deal.
The same can be done in the case of a Long-bot with a simple profit, if you want to trade the collected coin. If you manually delete its Take Profit order on the exchange, the bot will stop with the error “The order was canceled by the 3rd party”, and the coin will appear on the balance of the trading account. Then, when the Short-bot stops successfully, the Long-bot can be restarted with “Restart the deal” option (it will restore its take profit and complete this cycle).
Note. If you do not want to farm a coin, but make a profit in a stablecoin, then such a choice of profit currency in a spot Short-bot is possible only when closing a deal with a limit order.
If you close a trade or part of it with a market order (this includes an exit at the indicator signal and a Stop Loss at breakeven), then this order allows you to fix profits only in coins.
