Understanding how 3Commas bots utilize "Long" and "Short" algorithms can help you maximize profits in changing market conditions. This guide explains these algorithms step-by-step, using practical examples and tips to help you automate and optimize your trades.
Long Algorithm: Buy Low, Sell High
The Long algorithm is designed to profit from upward price movements. It involves buying an asset at a lower price and selling it at a higher price.
How It Works:
The Bot Buys Coins: The bot opens a trade by purchasing an initial amount of the selected asset.
Places a Sell Order: A Take Profit order is placed at a higher price to lock in profits when the market moves up.
Places Safety Buy Orders: Additional buy orders are placed below the purchase price to average the cost if the price drops.
Adjusts Take Profit: If safety orders are filled, the bot recalculates the average price and moves the Take Profit target accordingly.
Closes the Trade: Once the Take Profit price is hit, the bot sells the asset, closing the deal.
Example:
John has $1,000 and wants to make $10 trading ETH/USDT. Here's what happens:
The bot buys 0.2 ETH at $500 for $100.
A Take Profit order is placed at $550 (+10%), aiming for $10 profit.
Safety orders are placed at $450, $400, and $350, each $100 in size and 10% below the previous price.
If the price drops to $450, the bot buys 0.2222 ETH for $100, totaling 0.4222 ETH bought for $200. The average price becomes $473.70.
The bot adjusts the Take Profit price to $497.40 (+5%) to ensure a $10 profit based on the new average price.
If the price rises and reaches the new Take Profit target, the bot sells 0.4222 ETH for $210, achieving the goal.
Short Algorithm: Sell High, Buy Low
The Short algorithm is the opposite of the Long algorithm, profiting from downward price movements. It involves selling an asset at a higher price and buying it back at a lower price.
How It Works:
The Bot Sells Coins: The bot opens a trade by selling an initial amount of the selected asset.
Places a Buy Order: A Take Profit order is placed at a lower price to lock in profits when the market moves down.
Places Safety Sell Orders: Additional sell orders are placed above the selling price to average the profit if the price rises.
Adjusts Take Profit: If safety orders are filled, the bot recalculates the average price and moves the Take Profit target accordingly.
Closes the Trade: Once the Take Profit price is hit, the bot buys back the asset, closing the deal.
Example:
John owns 1 ETH and wants to make $10 using the ETH/USDT pair. Here's how it works:
The bot sells 0.2 ETH at $500 for $100.
A buy order is placed at $450 (-10%), aiming for $10 profit.
Safety orders are placed at $550, $600, and $650, each 10% higher than the previous price.
If the price rises to $550, the bot sells another 0.2 ETH for $110. The total sold is 0.4 ETH for $210.
The bot adjusts the Take Profit target to $500, buying back 0.4 ETH for $200 and leaving $10 as profit.
If the price drops to the Take Profit target, the bot buys back 0.4 ETH, completing the trade.
Key Points for Both Algorithms
Profit Currency:
By default, bots generate profits in the left part of the trading pair. For example:BTC/ETH: Profits are in BTC.
USDT/ADA: Profits are in USDT.
This can be adjusted in the bot's "Profit Currency" settings.
Safety Orders:
Safety orders are crucial for handling market dips or surges. They help lower the average buy price (for Long) or increase the average sell price (for Short), allowing the bot to adapt to market conditions.
Market Conditions:
Use the Long algorithm in bullish markets where prices are generally rising.
Use the Short algorithm in bearish markets where prices are generally falling.
Initial Investment:
The Long algorithm requires funds in the base currency (e.g., BTC in BTC/ETH).
The Short algorithm requires funds in the quote currency (e.g., ETH in BTC/ETH).
Tips for Optimizing Bot Performance
Start Small: If you're new to trading bots, begin with small amounts to understand how the algorithms work in live markets.
Monitor Volatility: High volatility can trigger multiple safety orders. Adjust settings to match your risk tolerance.
Leverage Backtesting: Test your strategies using historical data before applying them to live trades.
Set Realistic Profit Targets: Avoid setting excessively high Take Profit levels, as the market may not reach them consistently.
Use Trailing Features: Trailing Take Profit and Stop Loss can help maximize profits during market surges or minimize losses during downturns.
FAQs
Can I use the Long and Short algorithms simultaneously?
Yes, you can run separate bots for Long and Short algorithms on different trading pairs or the same pair with different settings.What happens if safety orders aren't filled?
The bot will continue to monitor the market and adjust the Take Profit or buy-back price based on completed trades.Is manual intervention required?
No, the bot operates automatically based on your configured settings. However, you can manually stop or adjust trades if needed.
By understanding and leveraging the Long and Short algorithms, you can take advantage of both rising and falling markets, making 3Commas bots a powerful tool in your trading arsenal.