We are thrilled to announce that short bots are now available!

In this article, we will see why a short bot could be interesting, how it works, and how to trade safely.

Why use a short bot?

Just like a buy and sell bot, the idea of a short bot is to make a profit out of price action, but in a bear market. For a buy and sell bot, we just need a simple spot trading wallet, and we profit from buying at a low price and selling at a higher price. Now for a short bot, we profit from selling at a high price and buying at a lower price. In order to accomplish this, a margin account is needed.

How does it work?

Imagine you just sold your BTC because your Buy and Sell bot sent a sell signal. Your portfolio is now in USD. In order to profit from the downtrend, the short bot, using isolated margin, will borrow some BTC and immediately sell it. This is how we “enter short”, by selling BTC we do not have, we use leverage to generate profits. In order to “exit short”, the bot will buy the BTC sold earlier and automatically repay the borrowed amount. The key here is that the position size remains the same in USD. That way, if we exit short at a lower price, we make profit in BTC.

How to trade safely

With automated trading, risk management is key to being profitable in the long run. That is why we recommend to always keep your short bot position size less than or equal to your available USD in your isolated margin account. This way, you will keep leverage lower than or equal to 1 and avoid being liquidated, because you will always have the funds to repay the borrowed BTC. For example, if I short BTC at a 60,000 USD price, the liquidation price will be 120,000 USD. The bot will exit the position way before that! You don't need a higher leverage, especially in crypto automated trading. This is what pros will tell you!

In the next article, we will see how to create a custom short bot on BlockchainFiesta step by step.

Written by Cyatophilum - Created 1 month ago - Last edited 1 month ago