Welcome to the Trading With A Bot channel. Note that asides of my "Tiny DOGE" bot, I have
two new bots running – a Long and a Short BTC bot. Today I'd like to continue using 3Commas
automation platform to show you how to hedge your positions. There is a "Hedge Mode" feature
available on Binance Futures, but 3Commas does not support it yet. So instead, I will show you
how to hedge BTC using different quote currencies and we will also explore a new feature available
from Binance Futures called "Multi-Assets Mode". By default you have the "Single Asset Mode"
enabled, so let's go back in time and explore first how my BTC hedged position would work under
the Single-Asset Mode. I go to create a new DCA bot in 3Commas and I search for BTC.
Uniquely,
I see that BTC can be traded with BUSD and USDT quote currencies. Both are pegged to the United
States dollar with a one-to-one equivalence, and thus I can create two independent positions,
one Long position and one Short position, without having the Hedge Mode enabled. And this
is the first main point of the strategy that I am covering today. The price of the BTC/BUSD pair
will be almost an exact copy of the BTC/USDT pair, and thus having one DCA bot running a Short grid
and another running a Long grid will emulate the hedge setup.
Before I am able to save and start
my BTC/BUSD bot, however, I realize that I do not have any BUSD funds on my Futures account and so
I will go now into my Futures wallet and fix this. I'll press the "Convert" button to
exchange some of my USDT into BUSD, but since I am doing it for the first time now
I am a little confused with this interface. I specify the amount I want to convert, press
"Confirm" and nothing appears to happen. And so I repeat the whole thing
and press "Confirm" again. And again. Here I decided that I should reload
the page and I am doing that. In fact, I see that there's an "Assets" tab which I haven't paid
attention to before.
It makes perfect sense – now as I have multiple assets in my Futures account,
I should see them all under the "Assets" tab. So the conversion went fine and I have both
BUSD and USDT currencies available. I can start my second BTC bot. Please ignore the 3Commas DCA
related settings that I have for these two bots. I will come back and fine-tune the
settings in the second part of this video. To make this experiment visually appealing,
I had created a very dense grid for both Long and Short bots and I had made them an exact
mirror of each other. My BTCBUSD pair is Long and my BTCUSDT pair is Short. When BTC price
increases, my Long bot will be making a profit and if the opposite will happen and the price will
be falling down, it is my Short bot that will be profitable.
The grids that I have created have
different density and different size. This is done with the help of 3Commas automation platform and
if you are not at all familiar with 3Commas or DCA bots, please check out my previous videos where
I introduce these concepts with my famous "Tiny DOGE" bot example. You can also create this setup
with a manual trading. You do not have to use automation to set up a Long and a Short position
with bitcoin by using BUSD and USDT assets. Note that the assets are appearing
here, in the left-bottom corner. Currently I am looking at my BUSD balance.
Based
on my BUSD balance, I can also see Margin that my position had used. And I can see my Margin Ratio.
The Margin Ratios are different for BUSD and USDT positions because I had a slightly different
balance for each. I had around 30 BUSD and around 24 USDT. Note how the "Assets" screen had switched
now to USDT as I selected the BTC/USDT position. I had recorded this setup while I had the "Single
Asset Mode" enabled. You see, while I have hedged my BTC position with a Long and a Short, I have
two separate wallets – one in BUSD and another in USDT, and this does not help to reduce my risk
of liquidation. The profit that I make on my Long position is not added to hedge against the
possible loss I am making on my Short position. I will now cover the second aspect point of
the strategy: the "Multi-Asset Mode".
You can enable this mode by going into "Preferences"
and then into the "Asset Mode" menu, but first you need to close all of your positions, and so
I stopped the two bots that you had just seen. Also the "Multi-Asset Mode" does not work
with the Isolated Margin type, and you may need to make some exceptions for some coins.
Once
enabled, you'll see the "Multi-Assets" section on your bottom-right pane. Now, the assets you have
under your Futures account will be combined into one Equity account and all your open positions
will share this combined equity balance. Binance Futures had introduced this enhancement just
recently and it is an excellent feature, allowing you to reduce your risk of liquidation when
running a hedge setup. You can check out the guide provided by Binance, I will leave a direct link
to the guide in the description of this video. I have only two assets: USDT and BUSD, but
their value combined creates my Futures "Account Equity". I'll go back to 3Commas
and restart my Short and my Long bots. Each of the bots will still use their individual
quote currency wallets to perform "buy" and "sell" operations, but the wallet's combined value is
now shared among the positions for collateral.
This significantly reduces your liquidation risks
and is a great complementary feature of your hedge setup. Note how the Margin Ratio is the same
for these two positions now. I used BTC base currency for this hedge setup, but you can extend
this strategy for some other contracts as well. The key part of this strategy is to find the base
currency that is available in both BUSD and in USDT, thus allowing you to set up both a Short
and a Long positions. By searching for BUSD you can see a few other contracts, such as Ethereum or
BNB that could also be used for this hedged setup. BUSD is a tightly regulated one-to-one USD-backed
crypto Stable Coin, and I expect that more and more contracts will be available in both BUSD
and USDT pair combinations.
Having these two options for your quote currency and the ability
to share your Maintenance Balance as a single Account Equity provide a significant edge for both
profit opportunities and risk management. With both the Long and the Short positions in place,
you make money no matter where the market goes. And the profit for one of the positions is helping
with the Maintenance Balance for both of them. The challenge I see here is still to find the right
configuration for your DCA bots for both Long and a Short position. Or if you trade manually, to
understand the fundamentals as well as technical indicators that are required for you to place
and size your Long and your Short positions.
What you see on the screen now is the fast forward
of the work I do behind the scenes to back-test and size my DCA bots. Each coin will
have a slightly different configuration, and now we're adding into the
complexity both Long and a Short. Setup they should not be mirrored, they should
be tuned based on the data available. In the previous 4 videos that I had posted, I go
into details of how to back-test the 3Commas DCA bots and how to budget them to understand the
wallet requirements and liquidation risks. My "Tiny Long DOGE" bot had proven to be successful
and had now run for over 45 days without interruption, producing circa 50% of return per
month. Lately, I had been exploring various hedge and diversification setups. The configuration
I presented in this video, allowing a Long and a Short position on the same base-currency,
with the combination of the "Multi-Assets Mode" is an important addition to my strategies portfolio.
What remains here for today is for me to provide you with the exact configuration of a Long
and a Short bot for the "Hedged BTC" setup. I think the configuration I've done today
is nearly final, and I am leaving the links for both Long and a Short bot in the description
below.
You can look at their performance and you can copy them, if you wish. I also started keeping
"bot journals" and while I share most of my work publicly, there are some bot configurations that
I design especially for my Patrons. I would very much appreciate your support and your backing on
my Patreon. My goal is to release at least one bot configuration per month, thoroughly tested
and documented, and a regular YouTube video.
The link to my Patreon is
right below, so check it out..