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Market Making 101 - Become a Maker with Quadency

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

Key Takeaways

  • 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. ”illiquid-market-quadency”

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.

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.

Disclaimer: contents of this article are for general market education and commentary and are not intended to serve as financial, investment, or any other type of advice.