It is an advanced automation strategy that allows you to maintain your Vault’s Multiple factor in a predefined value, by automatically buying or selling your collateral when your collateralization ratio changes.
To use this strategy, you must first set the auto-buy trigger and the auto-sell trigger. As their name implies, when your Vault’s collateralization ratio hits these values a sell or buy action will be triggered, selling or buying your collateral to reach the predefined multiple factor. Figure below shows a graphical representation of how Constant Multiple works.
This automation is similar to Auto-Buy and Auto-Sell, but instead of targeting a fixed collateralization ratio, it targets a multiple factor. It cannot be combined with Auto-Buy and Auto-Sell, but you can have a Stop-Loss active for your vault at the same time.
To enable Constant Multiple, you need to set up five parameters:
- Sell Trigger: The Collateralization ratio that will trigger a collateral sell action
- Buy Trigger: The Collateralization ratio that will trigger a collateral buy action
- Target Multiple: The multiple that is returned to as a result of a buy or sell action
- Max Buy Price: The maximum collateral price for an automated buy action
- Min Sell Price: The minimum collateral price for an automated sell action
When your collateralization ratio based on the next collateral price hits the sell trigger, the sell action will sell part of your collateral to DAI, which will be used to repay your debt and decrease your multiple factor. In the same fashion, when the next collateralization ratio hits the buy trigger, the buy action will generate more DAI debt with your collateral, use it to buy more collateral, lock it back into the Vault, and therefore increase your multiple factor.
You can limit the collateral price range where the automation will be active by setting the maximum buy price, and the minimum sell price. In this case, if the next collateral price is outside of your range, the Constant Multiple will not trigger.
Keep in mind that all calculations of collateral prices, as well as collateralization ratios, are based on MakerDAO’s Oracle Security Module, which are updated every hour, and can differ significantly from the collateral’s market price.
Constant Multiple is an advanced automation strategy. All parameters values should be backed up by a risk analysis, based on your personal strategy and risk tolerance. You can read more about Constant Multiple risks here.
The video below shows a step-by-step guide on how to set up Constant Multiple automation for your Vault.