Long and Short Strategy on TradeSanta
TradeSanta’s Grid and DCA bots differ in how they take profit. However, both trading bots can execute either long or short strategy.
Long strategy means that the crypto bot will buy coins gaining profit by selling them later at a higher price. The profit you get is in the quote currency – the one you used to buy coins, second currency of the pair on your cryptocurrency exchange.
For example, in BTCUSDT pair, USDT is the quote currency that you buy BTC with, and you will receive profit in USDT when the BTC price goes up. USDT is also the currency that you have to have on your account for bot to trade.
BTC is the base currency that you will buy and sell to profit.
A bot in the short strategy will sell the coins you have and buy them back later at a lower price. Thus, in the end you will have the same amount of coins plus the profit you made on the price difference in quote currency. The profit you get, like in a long strategy, is also in quote currency. But you there must be a base currency (first currency of the pair) on your account to short the coin.
For example, to start a short trading bot on BTCUSDT pair, you will sell BTC on you account, to buy the same amount later at the lower price. The pride difference of selling and buying BTC is your profit. Disclaimer: the concept of shorting in automated trading is different from the common definition of shorting. Traders on traditional trading markets short with borrowed money and return the same amount, leaving the profit they made by selling the borrowed assets and buying it back to themselves.
By setting up a long bot on BTCUSDT pair you bet that BTC price will go up, so you buy it now with USDT. By setting a short bot on BTCUSDT pair, you bet that the BTC will go down, so you sell it to gain on the price drop.
How to choose long or short strategy
Choose a trading strategy according to the crypto pair’s trend. Let’s say technical and fundamental analysis of a coin points to the uptrend. It doesn’t make much sense to short these coins. Instead, it makes sense to set up a long bot for the coin as a base currency and take advantage from the price increase. And vice versa, if there’s indication of an asset’s possible loss of value, short bot can help you gain from it.
Don’t forget that you can only short coins you have on your balance, so the number of short bots you can set up also depends on your account portfolio. There’re also coins that you can’t short since they are traded as quote currency only, e.g USDT or BTC on some exchanges.
Some traders set up both long and short bots simultaneously to hedge their risks. To set up bots in two different price directions, one must make sure he has enough both base and quote currency.