Pure Market Making¶
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).
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.
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.
- 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.
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 and Advanced Configuration¶
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.
Basic Configuration Parameters and Walkthrough¶
The following parameters are fields in Hummingbot configuration files located in the
/conf folder (e.g.
||The exchange where the bot will place bid and ask orders.|
||Token trading pair symbol you would like to trade on the exchange.|
||The strategy will place the buy (bid) order on a certain % away from the mid price.|
||The strategy will place the sell (ask) order on a certain % away from the mid price.|
||The strategy will check every tick and cancel the active orders if an order's spread is less than the minimum spread parameter.|
||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.
||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.
||Allows the user to set and maintain a target inventory split between base and quote assets.
This is an advanced parameter we added during basic configuration walkthrough. See Inventory Skew for more information on this feature.
||Target amount held of the base asset, expressed as a percentage of the total base and quote asset value.
This question prompts when answering
||Sets the expiration of limit orders on 0x relayers like Radar Relay and Bamboo Relay since cancellation is an on-chain event requiring gas (you become your own counter party to void the contract), while expiration is not an on chain event as the order is invalidated by the timestamp.
If trading on a centralized exchange, order refresh time will be used.
Tip: Autocomplete inputs during configuration
When going through the command line config process, pressing
<TAB> at a prompt will display valid available inputs.