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perpetual_market_making

📁 Strategy folder

📝 Summary

This strategy allows Hummingbot users to run a market making strategy on a single trading pair on a perpetuals swap (perp) order book exchange.

Similar to the pure_market_making_strategy, the perpetual_market_making strategy keeps placing limit buy and sell orders on the order book and waits for other participants (takers) to fill its orders. But unlike market making on spot markets, where assets are being exchanged, market making on perpetual markets creates and closes positions. Since outstanding perpetual swap positions are created after fills, the strategy has a number of parameters to determine when positions are closed to take profits and prevent losses.

đŸĻ Exchanges supported

perp exchanges

👷 Maintenance

  • Release added: 0.36.0 by CoinAlpha
  • Maintainer: CoinAlpha

🛠ī¸ Strategy configs

Config map

Parameter Type Default Prompt New? Prompt
derivative string True Enter your maker derivative connector
market string True Enter the trading pair you would like to provide liquidity on [exchange]
leverage int True How much leverage do you want to use?
position_mode string One-way True Which position mode do you want to use? (One-way/Hedge)
bid_spread decimal True How far away from the mid price do you want to place the first bid order?
ask_spread decimal True How far away from the mid price do you want to place the first ask order?
minimum_spread decimal -100 False At what minimum spread should the bot automatically cancel orders?
order_refresh_time float True How often do you want to cancel and replace bids and asks (in seconds)?
order_refresh_tolerance_pct decimal 0 False Enter the percent change in price needed to refresh orders at each cycle
order_amount decimal True What is the amount of [base_asset] per order?
long_profit_taking_spread decimal 0 True At what spread from the entry price do you want to place a short order to reduce position?
short_profit_taking_spread string 0 True At what spread from the position entry price do you want to place a long order to reduce position?
stop_loss_spread string 0 True At what spread from position entry price do you want to place stop_loss order?
time_between_stop_loss_orders decimal 60 True How much time should pass before refreshing a stop loss order that has not been executed? (in seconds)
stop_loss_slippage_buffer decimal 0.5 True How much buffer should be added in stop loss orders' price to account for slippage (Enter 1 for 1%)?
price_ceiling decimal -1 False Enter the price point above which only sell orders will be placed
price_floor decimal -1 False Enter the price below which only buy orders will be placed
order_levels int 1 False How many orders do you want to place on both sides?
order_level_amount decimal 0 False How much do you want to increase or decrease the order size for each additional order? (decrease < 0 > increase)
order_level_spread decimal 1 False Enter the price increments (as percentage) for subsequent orders? (Enter 1 to indicate 1%)
filled_order_delay float 60 False How long do you want to wait before placing the next order if your order gets filled (in seconds)?
order_optimization_enabled bool False False Do you want to enable best bid ask jumping? (Yes/No)
ask_order_optimization_depth decimal 0 False How deep do you want to go into the order book for calculating the top ask, ignoring dust orders on the top (expressed in base asset amount)?
bid_order_optimization_depth decimal 0 False How deep do you want to go into the order book for calculating the top bid, ignoring dust orders on the top (expressed in base asset amount)?
price_source string current_market False Which price source to use? (current_market/external_market/custom_api)
price_type string mid_price False Which price type to use? (mid_price/last_price/last_own_trade_price/best_bid/best_ask)
price_source_derivative string False Enter external price source connector name or derivative name
price_source_market string False Enter the token trading pair on [external_market]
price_source_custom_api string False Enter pricing API URL
custom_api_update_interval float 5 False Enter custom API update interval in second (default: 5.0, min: 0.5)
order_override json False

📓 Description

Trading logic

Approximation only

The description below is a general approximation of this strategy. Please inspect the strategy code in Trading Logic above to understand exactly how it works.

Architecture

The perpetual_market_making strategy works in a similar fashion as the pure_market_making_strategy, except adapted to trading perpetual swaps. Trading perpetual swaps creates positions, and doesn't just exchage assets like trading on spot markets.

On every tick the strategy creates new opening orders and existing orders are being cancelled. If an outstanding order is filled, the strategy then has to manage the position.

Figure 1: General strategy flow chart

Order Placement

The strategy places long and short orders to open perpetual swap positions at predefined distances from a mid price. These distances are given by the parameters bid_spread and ask_spread.

On every tick, outstanding open orders are being evaluated. If they're too far from the proposal orders, as defined by the order_refresh_tolerance_pct parameter, they will be cancelled and replaced by new orders. If an active order finds itself below a min_spread threshold from the mid price, it will also be cancelled.

It's also possible to place multiple orders on each side in price layers as defined by the parameters order_levels, order_level_amount and order_level_spread. The closest to the mid price will be always orders at distances bid_spread and ask_spread.

The strategy can be restricted to trade only within a specific price band, defined by the price_ceiling and price_floor parameters. If the mid price is outside of this interval, no orders will be created, only cancelled.

Figure 2: Order creation and adjustment flow chart

Position Management

New opening orders are not being placed if one or more of existing opening orders were filled and the strategy holds a position. In that case, the position(s) is being evaluated on every tick whether to close it or not, and whether to either take a profit or a loss. These decisions are controlled by parameters long_profit_taking_spread, short_profit_taking_spread and stop_loss_spread.

Figure 3: Position management flow chart

ℹī¸ More Resources

Perpetual Market Making Demo | Hummingbot Live: Demo of the Perpetual Market Making strategy

Check out Hummingbot Academy for more resources related to this strategy and others!