Stop Loss Range

A liquidity provision strategy that acts like a stop loss can be a useful tool for strategists looking to mitigate their risk in volatile markets. The basic idea behind this strategy is to set a lower limit to the price at which a position can be sold, thus limiting the potential losses that could be incurred.

Under this strategy, first pick a percentage price can drop before the position is sold. For example, if the strategist chooses a percentage of 10%, then the position will be sold if the price drops by 10%.

Once the percentage has been chosen, recent candles are passed into the strategy. This means that the strategist is looking at recent price movements to determine the best entry point for the position. The goal is to enter the position at a price that is likely to rise in the short term, while also setting a lower limit to limit potential losses.

To enter the position, the strategist sets the upper tick at the current price. This means that if the price rises, the position will be profitable. However, to limit potential losses, the lower tick is set at the percentage down from the current price. This means that if the price drops by the chosen percentage, the position will be sold automatically.

The formula for a liquidity provision strategy that acts like a stop loss can be expressed as follows:

$$Lower Limit = Current Price - (Current Price * Percentage Drop)$$

$$Upper Limit = Current Price$$

Where:

1. Lower Limit is the price at which the position will be sold automatically if the price drops by the chosen percentage.

2. Current Price is the current market price of the asset.

3. Percentage Drop is the chosen percentage at which the position will be sold automatically.

4. Upper Limit is the price at which the position will be profitable if the price rises.

Using this formula, the strategist can determine the best entry point for the position by setting the upper tick at the current price and the lower tick at the calculated lower limit.

It is important to note that this strategy may not be suitable for all assets or situations. For example, in highly volatile markets, the price may fluctuate too much for this strategy to be effective.

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The execution of the bundle essentially refers to the calculation of these values, which are then handled by the Steer Protocol.