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Author Topic: Calculating price & spread for Market Making strategy  (Read 77 times)
Simo_007
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January 30, 2018, 04:23:48 PM
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I am developing a CryptoCurrency Market Maker bot. Now, I have succeeded in fetching programmatically:

  • the last 100 bids ordered from higher to lower (Price * Quantity) ;
  • the last 100 asks ordered from lower to higher ;

Now, how can I calculate the suitable price and spread. What indicators to take into consideration to estimate a fair price and bid/ask spread. I am looking for some practical hints and or/formulas.
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groundcontrol67
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January 30, 2018, 06:53:11 PM
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I am developing a CryptoCurrency Market Maker bot. Now, I have succeeded in fetching programmatically:

  • the last 100 bids ordered from higher to lower (Price * Quantity) ;
  • the last 100 asks ordered from lower to higher ;

Now, how can I calculate the suitable price and spread. What indicators to take into consideration to estimate a fair price and bid/ask spread. I am looking for some practical hints and or/formulas.


The danger with market making bots is always trying to get too close to a 'true' price. Mostly they're used for brand new markets with low liquidity and these are then ICO coins. I would do something a little more analytical in picking an ICO and gathering the expectations of the price around that. Then setting up your market with a reasonable spread either side of that, it's better with market making to not make many trades but be safe that if you do you can profit, as opposed to going too close to the 'true' price and then potentially overshooting it and making a loss.

Simo_007
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January 30, 2018, 07:15:20 PM
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I am developing a CryptoCurrency Market Maker bot. Now, I have succeeded in fetching programmatically:

  • the last 100 bids ordered from higher to lower (Price * Quantity) ;
  • the last 100 asks ordered from lower to higher ;

Now, how can I calculate the suitable price and spread. What indicators to take into consideration to estimate a fair price and bid/ask spread. I am looking for some practical hints and or/formulas.


The danger with market making bots is always trying to get too close to a 'true' price. Mostly they're used for brand new markets with low liquidity and these are then ICO coins. I would do something a little more analytical in picking an ICO and gathering the expectations of the price around that. Then setting up your market with a reasonable spread either side of that, it's better with market making to not make many trades but be safe that if you do you can profit, as opposed to going too close to the 'true' price and then potentially overshooting it and making a loss.

Thank your for your reply, can you give me a more practical methodology ? Do I have to take simply the last prices or the average for example of the last 10 trades ? How much wider must be the spread ?
groundcontrol67
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February 01, 2018, 04:55:32 PM
 #4

I am developing a CryptoCurrency Market Maker bot. Now, I have succeeded in fetching programmatically:

  • the last 100 bids ordered from higher to lower (Price * Quantity) ;
  • the last 100 asks ordered from lower to higher ;

Now, how can I calculate the suitable price and spread. What indicators to take into consideration to estimate a fair price and bid/ask spread. I am looking for some practical hints and or/formulas.


The danger with market making bots is always trying to get too close to a 'true' price. Mostly they're used for brand new markets with low liquidity and these are then ICO coins. I would do something a little more analytical in picking an ICO and gathering the expectations of the price around that. Then setting up your market with a reasonable spread either side of that, it's better with market making to not make many trades but be safe that if you do you can profit, as opposed to going too close to the 'true' price and then potentially overshooting it and making a loss.

Thank your for your reply, can you give me a more practical methodology ? Do I have to take simply the last prices or the average for example of the last 10 trades ? How much wider must be the spread ?

Honestly, I'm afraid I can't, I've only ever done it manually and never using a bot, it's more effort but when there's been a coin I've been interested in and realised there's not much of a market, it's something that's worked out for me.

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