If you're using futures or options, you can 'short' or 'buy a put'. This means you're lending someone else's money for a period of time, selling some of the asset, buying the asset back later (hopefully at a lower price), and giving the money back to the lender. I.e. you're making money when an asset price goes down.
My bot can either only short, or only long or do either when it seems promising. Here's how that might look on Bitcoin.
The bear market of 2018 would have been a great time to run a shorting bot. But during the bull market of 2019, 2020 and 2021 (so far) a shorting bot would most likely have lost all the gains from 2018. A bull bot would have made tremendous gains in the last three years, but seemingly have stayed pretty still during 2018.
The reason is that shorting on a retracement during an up-trend is much more difficult than longing a down-trend retracement. I suspect this is true for most assets, not only Bitcoin, but it depends on support vs. resistance patterns.
What does this mean? It probably means that it's low risk to run a (cautious) bull bot at any time. I am not doing that though. As you can see the bear bot has made a slight profit since mid-January 2021. I suspect we're already in the bear market.
How to proceed? Let's make a matrix.
| Market | Aggressive bot mode | Cautious bot mode | Safe bot mode |
|---|---|---|---|
| Bull | Bull | Bull | Bull |
| Bear | Both | Both | Bull |
| Uncertain | Both | Bull | Bull |
