For traders seeking to profit from volatile markets or market downtrends, shorting cryptocurrency is a great strategy. The potential for increased losses is what makes risk management so important. Coinrule is a good example of a crypto trading robot that can help you automate your short-term trades while still protecting your capital.
This guide explains how you can minimize your losses by shorting crypto. We’ll also show you how to utilize Coinrule’s intuitive automated platform to set up stop-losses, strategy-based exits, and rules that implement trailing stops.
What is Shorting in Crypto Trading?
The shorting (or selling short) process involves borrowing cryptocurrency and selling at current market prices, in the hope that the price of the currency will fall. The trader buys the asset back at a cheaper price to repay the debt, and keeps the difference.
Example:
If you short Bitcoin and the price drops from $40,000 to $35,000, then your profit is $5,000 for each BTC.
If instead the price goes up to $45,000, you will suffer a loss of $5,000 per BTC.
Shorting crypto: Key risks
Before you dive into automation, make sure to know the risks involved with shorting.
- Prices can rise indefinitely. This means that you could theoretically lose an unlimited amount of money.
- Volatility – Crypto markets can be volatile, and price swings can quickly liquidate short positions quickly.
- Liquidation by Margin: Your trade may automatically be closed if you are using leverage and a price movement goes against your position. This could result in a complete loss of capital.
Coinrule’s Crypto Trading Bot Reduces Losses
Coinrule is a crypto trading bot with no code that allows users to automate strategies for all market conditions, including short trades. Coinrule offers a no-code crypto trading bot that allows users to create automated strategies for any market condition, including short trades.
1. Automated stop-loss rules
Stop-losses will be your first defense. Coinrule lets you create rules to automatically buy back (exit) your position if it moves against the short.
Example Rule
If Bitcoin’s price rises by 5%, buy BTC to close out the short position.
Why it helps:
This eliminates the emotional aspect of decision-making and guarantees that your loss will be capped.
2. The Trailing Stop Strategy
A trailing-stop trade moves along with the market to lock in profits and exit automatically when the trend changes.
Example Rule
SHORT Bitcoin if RSI crosses over 70 – Exit if prices rise 2% since entry.
Why it helps:
Securing profits and preventing small price reversals from turning into large losses.
3. Multi-Condition Risk Triggers
Coinrule enables users to define multiple conditions of risk before taking action.
Example Rule
If BTC prices rise by 4% OR funding rates spike by 0.1%, exit short position.
Why it helps:
Combine technical and financial indicators to reduce risk.
4. Backtesting Before Going Live
Coinrule comes with a tool that lets you evaluate how well your shorting strategy has performed in the past.
Why it helps:
You can avoid the trial and error with real money. This reduces your risk of poor-performing strategies.
5. Capital allocation and Daily trade limits
You can specify how much capital each trading rule requires and the maximum number per day.
Why it helps:
Avoids overexposure and minimizes losses on choppy or trendless markets.
Shorting crypto trading bots: Best practices
How to protect your assets using automation
- Start with a small amount of capital and build up your investment as you prove that your strategy is consistent.
- Use multiple confirmations before placing shorts (e.g., RSI, MACD, trendlines).
- Never use maximum leverage. Use a maximum leverage of 3x in most cases.
- Update rules regularly based on market changes.
- Monitor your performance weekly, even when trading is automated.
Use Coinrule for a Safe and Strategic Short
Shorting crypto is profitable, as long as the risks are tightly managed. Coinrule’s trading bot for crypto allows you to access automated strategies that help protect your capital. They also execute trades accurately and keep you disciplined.
Coinrule can help you minimize your losses and trade smarter, whether you are a novice or a seasoned trader.
Build your first short-selling strategies with Coinrule today.