Configure a market making bot

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Configure a market making bot

This is part 2 of the Hummingbot quickstart guide:

  1. Install Hummingbot
  2. Configure a market making bot
  3. Run your bot

If you have successfully installed Hummingbot you should see the welcome screen, read through the important disclaimer and create a secure password.

Create a secure password

If you are using Hummingbot for the first time on this machine, the system will prompt you to create a password. This password will be used to encrypt sensitive configuration settings e.g. API keys, secret keys and wallet private keys.

Warning: For security reasons, the password is only stored locally in encrypted form. We do not have access to your password.

After setting up your password, you should see the command line-based Hummingbot interface.

hummingbot cli

First, let's walk through the design of the Hummingbot client interface:

  • Left top pane: command output pane
  • Left bottom pane: command input pane
  • Right pane: trading logs

Enter the command help to see a list of commands:

connectList available exchanges and add API keys to them
createCreate a new bot
importImport an existing bot by loading the configuration file
helpList available commands
balanceDisplay your asset balances across all connected exchanges
configDisplay the current bot's configuration
startStart the current bot
stopStop the current bot
statusGet the market status of the current bot
historySee the past performance of the current bot
exitExit and cancel all outstanding orders
paper_tradeToggle paper trading mode
exportExport your bot's trades or private keys
order_bookDisplay the current top bid and ask on the order book

Enter API keys

Hummingbot requires trade enabled API keys to access your exchange account. For exchange-specific information on how to find your API keys, please see the Connectors page in the Hummingbot docs.

Enter the command connect [exchange] to connect your exchange account to Hummingbot by adding API keys, where [exchange]is one of the exchanges supported by Hummingbot. You can hit SPACE or start typing to see available options.

The command connect shows if API keys have been successfully added.

Note that each exchange has a different format for API keys.

Tip: Some users have reported not being able to copy and paste their API keys on some platforms. Our help articles such as Other ways to copy and paste and Paste items from clipboard in PuTTY may help.

Create a new configuration

Next, we'll create a configuration for a market making bot using the pure market making strategy.

Enter the command create to begin creating a strategy config file. This configuration will be saved to a file that can be imported later on.

Select exchange and trading pair

Next, select the exchange and trading pair.

Since we are creating a paper trading bot, you don't need any assets on the exchange. However, you will need an account in order to generate API keys.

For the trading pair, select either ETH-USDT or ETH-USDC depending on the exchange. Here are two examples:

quickstart binance

Coinbase Pro

quickstart coinbase pro

Enter market making parameters

A bot's strategy parameters control how it behaves. During this step, you will define the basic parameters for your market making bot: order spreads, order sizes, and how often to refresh orders.

quickstart configure1

What spreads should I set? Order spread is one of the most important levers that market makers can control. Tighter spreads cause your orders to be filled more often, resulting in more trades, bigger changes in asset balance, and potentially more risk. We recommend that new users start with wider spreads, such as 1.00% for each side of the order book or higher.

Alternate buy and sell orders

The ping pong feature helps users in managing inventory risk by alternating buy and sell orders after a fill.

quickstart pingpong

Managing inventory risk in the face of market volatility is one of the most important aspects of market making. See the Advanced Market Making section of the Hummingbot docs for more ways to manage inventory risk.

Save configuration

Enter the name you want for your configuration file to complete the process.

Proceed to the next part of the Hummingbot quickstart guide: Run Your First Trading Bot

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