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Market-Making


Users that have a Hero subscription have access to a very interesting feature: the Market-Maker. But what is Market-Making? Why would you want to use it? There are three main reasons:

  1. If you’re a trader and would like to profit from a big spread.
  2. If your project/coin doesn’t have enough liquidity and your spread is too big.
  3. If you’re a starting exchange and need liquidity.

The Market Maker bot provides liquidity to a market of your choice, and can alternatively act as a way to profit from a big spread. The spread is the difference between the highest bid and the lowest ask. The highest bid is the highest someone is willing to offer, while the lowest ask is the lowest price someone is willing to sell his assets for. Illiquid markets have big spreads, and market makers are the ones that place orders around to spread profit from it, reduce the spread, and therefore create liquidity.

Illiquid assets may be hard to sell quickly because there is low trading activity or interest in the issue, indicated by a lack of ready and willing investors or speculators to purchase or sell the asset. As a result, illiquid assets tend to have lower trading volume.

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The definition of a market-maker: "A market maker must commit to continuously quoting prices at which it will buy (or bid for) and sell (or ask for) assets. Market makers must also quote the volume in which they're willing to trade, and the frequency of time it will quote at the Best Bid and Best Offer (BBO) prices.

Market makers must stick to these parameters at all times, during all market outlooks. When markets become erratic or volatile, market makers must remain disciplined in order to continue facilitating smooth transactions."

How does the Cryptohopper Market Maker bot work?#

Cryptohopper’s Market Maker bot allows you to place layered limit buy and sell orders, thus keeping the market liquid. By placing these orders, the orderbook of the exchange will change, making the spread smaller, and it will reduce the spread and make the market more liquid.

When you set up a Market-Maker, you need funds in your base currency and in the currency for which you want to make the market. Your Market-Maker will place orders “around” the spread, depending on your configuration.

Markets change fast, so you need to be able to change your order price fast. Click on the buy/sell signs to create an order, then drag and drop it to the desired place in the order book when things change.

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Market trends change, and so does your trading strategy. Use indicators to recognize market trends, and configure different trading strategies per market trend so you can switch between strategies as needed.

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You can even configure how the market maker should sell its orders. In a sideways market, you want to execute your buy and sell orders at the same time. When the markets go up, you first want to place buy orders and sell later. It’s the opposite with a downtrending market.

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Do you want a more detailed explanation about the Market-Maker? Or do you want help setting it up? Click here..


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