Dexalot Hummingbot Stepping Stones Part IV
Optimize your strategy
In this last part of the Dexalot Hummingbot Stepping Stones’ series, let’s learn more about market making. You have been running a bot and now you may want to know how to improve its performance. Well, there is a whole art and science to writing strategies that optimize market making. Humingbot offers a variety of resources. In fact, the whole reason Hummingbot was created was to give you the tools you need to do everything that professional market makers do. So let’s get to it!
Let’s check in with how your bot is doing and learn how to adjust it for better performance and as well as about other kinds and forms of trading strategies. We will take a look at one that showed profit in real-time.
Enter history in your Hummingbot dashboard
Notice the profit and loss and return %. If this is positive then you have made a profit. If it is negative then you should probably think about making some adjustments.
The pure marketing bot you have been using is explained in more detail here. The trading strategy itself is a continual process that monitors trading pairs in order to make trading decisions.
This particular strategy works best when the duration picked and spreads observed approximate a regular alternation of buys and sells with as little fluctuation as possible. You can apply the Hummingbot’s pure-market-making-strategy on a market that looks similar to this one.
So…if your target market does not look somewhat like this, it is best to look at different time frames for the market you are interested in and discover where the least fluctuation appears and where there are regular alternations of buys and sells ( green and red candles). You can often find close-to-market charts for the trade-pair you are interested in, by looking at an exchange such as Binance .
There are two main things to do once you have located such a chart:
- As you learned you can set different amounts of time for how you want to cancel and replace bids and asks.
It is a good practice to decide this time based on the time frame where you see the change between the red and green candles to be the most uniform in range and constant in alternation between buys and sells.
2. You can also adjust how far away from the mid-price you want to place your first bid and ask orders by taking an average candle height of the market you have decided is the one you are using.
These two videos describe in detail exactly how to do this. Check them out.
Now, try to create another bot and alter the parameter values to optimize your pure market-making strategy better. For instance, if your bot was alternating buys and sells faster than the market is changing, try increasing the duration. If you find the market is relatively flat for a different general candle height adjust your percent away from mid accordingly.
Pure marketing making is just one strategy. Hummingbot provides templates that you can configure, extend, and run in many different ways. Check out the Hummingbot Docs and Discord for more information.
Michael Feng Co-founder of Hummingbot demonstrated at the Avalanche Summit a variant of a different strategy called the cross-exchange mining strategy. Check out this video and get a taste of the amazing market-making profit opportunities that await you when you run a Hummingbot bot on Dexalot.
Michael made a profit in real-time while he was demonstrating the bot !
Author: Brad McFall
Editor: Dan Marcoulis
Graphics: Can Toygar
Dexalot is a revolutionary decentralized exchange bringing the traditional centralized exchange look and feel to a decentralized on-chain application. Its mission is to bring a truly inclusive and transparent environment where Dexalot users can trade crypto securely and efficiently, with no slippage or custody risk. It is built on Avalanche, the fastest smart contracts platform in the blockchain industry.