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.

position directional bias = (total_position_size - debt_token_A) / total_position_size

Where

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—these factors can all impact your profit, loss, and directional bias.