The Overbit Short Trend Bot works in the opposite way to the Long Trend Bot. In this article we will explain it assuming you don’t have familiarity with the long trend bot. If you believe that a particular market has the potential to trend down, then using a short trend bot is a good way to enter that market. The short trend bot can also be useful as a hedge against a long trend bot or a ping pong bot.
Check out the Long Trend Bot which works in the opposite way to the short trend bot.
The bot is split into two types of grids, DCA (dollar cost averaging) grid, and a take profit grid. When the bot starts, 50% of the initial investment is used to enter into a sell position at the current market price. After that trade is executed, a series of buy and sell limit orders are placed below and above the current position.
The number of buy orders initially placed represent the amount needed to exit the entire open position. Therefore, if the current open position is 1 BTC, and there are 5 buy grid levels, then their amounts would be 0.2 BTC each, at decreasing price levels. If all 5 buy orders are executed, the position would entirely be closed at a profit.
Market trends downwards
As the market starts to trend downwards, the buy positions will be executed and the bot’s open position will be gradually reduced. Therefore it will make a profit each time a buy line is executed.
Market trends upwards
If the market trends up, then the DCA grid will accumulate more of the position as sell orders are executed. As more sell orders are executed, new buy lines are placed at the bottom of the grid. You will notice the highest buy line is always at least 1 grid step % away from the average entry price. This means that if the market continued to trend up for quite some time and more DCA sell orders are executed, then the buy orders of the grid will all be shifted upwards, allowing the bot to exit its position at a higher price than initially intended, but still in profit.
Market moves sideways
The market might initially trend up or down and continue sideways. In this case, the buying grid lines will move up closer to the current price but always remain within 1 grid step % of the average entry price.
Once the bot has exited its current position, it will restart by opening a new market order for 50% of the original investment amount defined. It will then place new buy and sell limit orders. At that point the market will have shifted, therefore the levels will be at different price points.