Setting Up a Directional Bias

In simple terms, when you borrow an asset, you typically short it (If Borrow ratio is set as only SOL on SOL/USDC pair - you are shorting Solana). However, things aren't always as straight forward. In liquidity farming, the relationship between price and profit isn’t linear. DeFiTuna created a Direction Bias Indicator (DBI). DBI has a range that varies from 0 (which stands for maximum possible Short) to 1 (which stands for maximum possible Long). DBI takes into account leverage and borrow ration as well as collateral and calculates your Bias accordingly. You can view the impact of your directional bias directly on the PnL chart.

position directional bias = (total_position_size - debt_token_A) / total_position_size

The DBI ranges from 0 to 1:

• 0 means the strongest possible Short position.

• 1 means the strongest possible Long position.

Note only debt of token A in the provided equation is used. Token B debt is not taken into account.

Keep an eye on your range, deposit ratio, and borrow ratio, and always double-check the amount you're trading - all of these factors can affect your profit, loss, and directional bias. For optimal efficiency, we recommend aligning your directional bias with your final deposit ratio. You can learn more here.