Want to actively support the crypto trading ecosystem and profit in the process? Market Making was made for you! This powerful strategy allows you to trade high volumes even with a small balance, improve your ROI, and add liquidity to any trading pair. We promise it's easier than it sounds, so today we'll introduce you to how it works and show you how to become a successful Market Maker with Quadency.
- Market Making 101
- Become a Market Maker with Quadency
- 5 Easy Tips for Success
Market Making 101
- Market Making is a trading strategy in which makers take profit from continuously buying low and selling high at tight spreads.
- The difference from bid (price to buy) and the ask (price to sell) is called the Spread.
- Market Makers provide liquidity on trading pairs at exchanges by reducing that spread, creating a healthier trading experience.
- They are rewarded with lower fees on most exchanges.
What is Market Making?
Makers simultaneously place buy and sell limit orders on the order book adding liquidity to the market. This process ensures that traders can easily buy or sell at any time. When that's not possible, the market is considered illiquid and selling or buying an asset, becomes very difficult.
In the visual above, the market to the left would be considered inefficient, or illiquid, with a larger spread - the price difference between the bid and ask.
As Makers are continuously buying low and selling high on small price differences, the spread narrows. As it tightens, the market becomes more liquid, and buyers and sellers experience less slippage and better prices.
Profit while enhancing the trading experience
Makers profit from running this strategy in two different ways with the Spread as their main playground:
As trading activity increases and the market becomes more efficient, exchanges from the FastPass Network reward Makers with lower trading fees.
- They earn a small profit on the bid/ask spread each time their orders are filled, so the higher the frequency of trades, the higher the potential reward. Let's take a closer look with the exemple below:
Become a Market Maker with Quadency
It might sound complex, but thanks to Quadency's advanced yet easy-to-use automated trading library, anyone can become a Market Maker with only a small balance and minimal effort.
The Market Maker Plus Bot
The nature of market making makes it almost impossible to keep up without automation. Enter the Quadency Market Maker Plus bot, allowing you to deploy custom strategies within minutes.
Usually Makers are sensitive to market moves as an asset could plunge before the Maker has the time to resell it at a higher price. However, thanks to the Inventory Skew setting, traders can apply strategies in both down and up trends.
Configure your Dash Market Maker Plus
For further assistance along with the video, learn more about each setting in the explainer guide below.
Click HERE to expand/collapse below explainer guide
General SettingsGeneral settings the most basics one, they allow you to configure on which exchange you will deploy a bot and which pair will be traded.
- Select the exchanges available for dash - Liquid KuCoin, HitBTC and CoinBase Pro
- Select the pair you want to trade on i.e. DASH/BTC. If you are open to other pairs, Quadency will automatically display the pairs available on the exchange.
- At this step, be sure to have roughly 50/50 split between the value of DASH and the other asset. This is required for the bot to place both buy AND sell orders.
- You can shift balances around by placing the necessary orders from the Trade tab or by using our Rebalancer.
Strategy SettingsOn Quadency, the strategy settings are specific to each bot, this allows you to have complete control of your strategy, from the amount to buy or sell to the distance between each order.
- Select the number of orders - the number of limit orders to place on the book, so if you select 4, the bot will place 2 buy and 2 sell orders.
- Set order start amount- the amount to buy and sell for the innermost orders on the book
- Set an order step size- the amount that will be added to all subsequent orders, starting from the first.
- Let's say your first order is 1 DASH, and you select an order step of 0.5, the second order will be 1.5 DASH, the third one 2 DASH, etc. Set it to 0 if you want all your orders to be same size.
- Set the distance between buy orders & sell orders - this defines how far apart the orders are on the book
- If the first buy order is placed at 67.18 USDT, the second one will be placed at 67.082 USDT. Meanwhile its sell orders will be placed at 67.31 and 67.42 USDT, respectively.
- Set the order replenish delay - duration in minutes from the time the first order is filled until all remaining orders are cancelled and replaced with a new set of orders. This process repeats until the bot is turned off.
Advanced SettingsThe advance settings are optional, but will help you take advantage of any trends.
- Enable the Inventory Skew - this will allow you to skew your orders' size to buy more than you sell and vice-versa. This is useful if you want to slowly sell or acquire an asset, or simply wish to maintain a 50/50 split between both traded assets' values.
- Target Base Percent - this is the proportion of base asset value to target i.e DASH in the DASH/USDT pair. - If one has less DASH than USDT, let's say it's a 30/70 split but wants his portfolio to be 60% DASH, the Target Base Percent is 60%.
5 Easy Tips for Success
Use the Inventory Skew Calculator - use this to see how order sizes can be skewed to target a certain base/quote ratio, especially if you selected the advanced settings.
Choose your market wisely - Market Makers profit more when the bid-ask spread is wide (above 0.05%) and when there is sufficient daily trading volume. However highly traded pairs will have a lot of competition between Makers, making it more difficult to generate profits.
Run multiple bots - Deploy the same strategy on as many trading pairs and FastPass exchanges you wish.
Join our trading competitions - Interested in market making but don't know where to start? Quadency hosts ongoing contests where you can not only practice your skills, but also win big prizes. Ready to claim your share of over $7,000 in prizes by trading Dash? Enter Now!
Earn on FastPass exchanges - When market making on Dash FastPass Exchanges, earn rewards by providing liquidity. Learn more.