Pure Market Making
Learn how to use pure market making strategies
How it Works
In the pure market making strategy, Hummingbot continually posts limit bid and ask offers on a market and waits for other market participants ("takers") to fill their orders.
Users can specify how far away ("spreads") from the mid price the bid and asks are, the order quantity, and how often prices should be updated (order cancels + new orders posted).
WARNING: Please exercise caution while running this strategy and set appropriate kill switch rate. The current version of this strategy is intended to be a basic template that users can test and customize. Running the strategy with substantial capital without additional modifications may result in losses. |
Schematic
The diagram below illustrates how market making works. Hummingbot makes a market by placing buy and sell orders on a single exchange, specifying prices and sizes.
Prerequisites
Inventory
- You will need to hold sufficient inventory of quote and/or base currencies on the exchange to place orders of the exchange's minimum order size.
- You will also need some ETH to pay gas for transactions on a decentralized exchange (if applicable).
Minimum Order Size
When placing orders, if the size of the order determined by the order price and quantity is below the exchange's minimum order size, then the orders will not be created.
Example:
bid order amount * bid price
< exchange's minimum order size
ask order amount * ask price
> exchange's minimum order size
Only a sell order will be created but no buy order.
Basic Parameters
We aim to teach new users the basics of market making, while enabling experienced users to exercise more control over how their bots behave. By default, when you run create
we ask you to enter the basic parameters needed for a market making bot.
See Advanced Market Making for more information about the advanced parameters and how to use them.
The following parameters are fields in Hummingbot configuration files located in the /conf
folder (e.g. conf_pure_mm_[#].yml
).
exchange
The exchange where the bot will place bid and ask orders.
Prompt:
>>> binance
market
Token trading pair symbol you would like to trade on the exchange.
Prompt:
>>> BTC-USDT
bid_spread
The strategy will place the buy (bid) order on a certain % away from the mid price.
Prompt:
>>> 2
ask_spread
The strategy will place the sell (ask) order on a certain % away from the mid price.
Prompt:
>>> 3
order_refresh_time
An amount in seconds, which is the duration for the placed limit orders. The limit bid and ask orders are cancelled and new orders are placed according to the current mid price and spreads at this interval.
Prompt:
>>> 10
order_amount
The order amount for the limit bid and ask orders. Ensure you have enough quote and base tokens to place the bid and ask orders. The strategy will not place any orders if you do not have sufficient balance on either sides of the order.
Prompt:
ping_pong_enabled
Whether to alternate between buys and sells. For more information on this parameter click this link.
Prompt:
TIP: For autocomplete inputs during configuration, when going through the command line config process, pressing |
Configure parameters on the fly
Currently, only the following parameters can be reconfigured without stopping the bot. The changes will take effect in the next order refresh.
- bid_spread
- ask_spread
- order_amount
- order_levels
- order_level_spread
- inventory_target_base_pct
- inventory_range_multiplier
- filled_order_delay
NOTE: Reconfiguring of inventory_target_base_pct for DEX connectors is not working at the moment. |