Advanced Settings and Risk Controls

Overview

While the default Market Maker Bot settings are designed to allow you to boost orderbook liquidity while remaining market-neutral, the Advanced Settings allows you to express a specific view on the market.

By adjusting Directional Bias, Reaction Times, and Spreads, you can effectively "take a bet" on price movement or volatility and potentially earn higher profits/mitigate your fees from liquidity provision.

⚠Risk Warning: Advanced settings move the bot away from neutral market making. Incorrect configurations (e.g., Grid Mode in a trending market or extreme Directional Bias) can lead to stalled orders or increased losses additional to fees.

Familiarize yourself with the advanced settings, then explore strategies for each use case on the following page.

Strategies & Configurations

Participation Rate

Participation Rate controls how quickly the bot aims to complete your order by adjusting the execution speed relative to the pair's 24-hour trading volume. This determines your order duration: faster modes complete orders quickly but may have higher market impact, while slower modes spread execution over a longer period to minimize impact.

The Three Settings

Aggressive

• Fastest execution speed

• Calculates duration using a 0.10 rate multiplier against 24h volume

• Results in the shortest order duration for a given order size

• Best for: Fast-moving markets where you need to establish or exit positions quickly, or when minimizing exposure time is the priority

• Trade-off: Faster execution may result in higher market impact, less favorable average fill prices and potentially higher losses

Normal (Default)

• Moderate execution speed, approximately 4× longer than Aggressive for the same order size

• Calculates duration using a 0.025 rate multiplier against 24h volume

• Best for: General-purpose market making where you want consistent execution without excessive speed or delay

• Trade-off: Balanced approach suitable for most trading scenarios

Passive

• Longest order duration, approximately 10× longer than Aggressive for the same order size

• Calculates duration using a 0.01 rate multiplier against 24h volume

• Best for: Minimizing market impact, trading lower-liquidity pairs, or strategies where time is less critical than execution quality

• Trade-off: Longer duration increases exposure to directional market moves and requires more patience. Orders may not fill at all, and eventually getting stoplossed if market moves against that order.

Important Notes

• Minimum Duration: All orders enforce a 10-minute minimum duration regardless of calculated speed

• Rate vs. Participation: These settings control execution pace relative to 24h volume metrics, not literal real-time market participation percentages

• Market Impact: Aggressive mode consumes liquidity more quickly and may impact your average fill price, especially in low volume markets

• Directional Risk: Passive mode extends your exposure window, increasing sensitivity to directional price moves

• Reaction Time Interaction: Execution Mode works in conjunction with Reaction Time settings (Quick/Normal/Patient) to control both overall order duration and order refresh frequency

Reference Price: Mid Price, Grid Mode and Blend Mode

The bot has two distinct approaches to order placement. While Mid Price Mode was the original iteration of the bot and remains highly effective for general liquidity provision, Grid Mode introduces specific logic for profit locking (assuming price moves in your direction) and the cost of speed or potentially having your order cancelled due to auto stoploss all together.

The Reference Price determines the "center" point for your buy and sell orders. Your available spread options (see below) change depending on which reference mode you select.

Mid Price (Standard/Default):

Quotes are placed based strictly on the current order book mid-price.

• Behavior: Orders float with the market price. It does not track the specific entry price of open positions when placing new quotes.

• Best For: General purpose market making, volume generation, and Point farming where liquidity provision and getting the order complete is a priority over per-trade PnL.

• Pros: High probability of fill, speed and follows the market trend.

• Cons: Profitable spreads are not guaranteed relative to your entry price for each leg (you might buy high and sell low if the market drops fast).

Available Spread Options:

The Spread Scale (-50 bps to +50 bps): The spread setting functions as a trade-off between Fill Rate and Profit Margin.

• Lower Spreads (0 – 2 bps): Prioritizes Speed. You place orders very close to the market price to maximize execution frequency and capture exchange fees/rebates. The trade-off is little to no profit from the spread itself.

• Higher Spreads (-10 to +00 bps): Prioritizes Margin. You place orders further away ("fishing"), waiting for volatility to hit your price. You get fewer fills, but each fill captures a significantly larger profit. However this can amplify your losses significantly. Wider the spreads the further away you are from the mid price

Grid Mode (Advanced)

Grid mode prioritizes profit generation over simply placing limit orders. However, this approach may decrease the likelihood of order completion.

• Behavior: Uses your last executed price as the anchor. It follows the rule: "Don't place buy orders higher than I sold, and don't place sell orders lower than I bought."

• Best For: Range-bound (sideways) markets where you want to lock in profitable spreads.

• Pros: Guarantees a $0 PnL or better on the spread itself.

• Cons: Your order could stall. If the price trends strongly in one direction (e.g., pumps up), your sell order is filled, but the price moves away from your buy order. The bot will wait for price to revert. If the price never comes back, the bot stalls.

Safety Mechanism: Grid Mode has a hard stop at ±0.5% from the last fill price. If the market moves beyond this range, the order may cancel to clean up exposure and prevent indefinite bag holding.

Available Spread Options:

The Spread Scale (-50 bps to +50bps): In Grid Mode, the spread acts as a control for Utility vs. Profit.

• Negative Spreads (-10 bps to -1bps): Price Concession. Use these values when you need to "unstick" a stalled position. By setting a negative spread, you are effectively paying a small premium to force an exit and free up your capital. The more negative the number (e.g., -10 bps or -50bps), the more aggressively the bot reaches to close the trade/the more you will lose.

• Zero Spread (0 bps): Near Break-Even. Both legs execute at the exact same price. You make no profit on the spread itself but may help you rebalance your exposure faster without a deeper haircut. However, you will still be at a net-loss due to exchange and builder fee.

• Positive Spreads (+1 bps to +50 bps): Profit Locking

  You set a desired profit margin above your entry price, which ensures a profitable round-trip trade. However, this increases the risk of the order stalling if the limit price isn't met. While wider spreads can lead to higher profits, they require patience as you wait for the price to reach your target. If prices do not move in your favor, you might face a stop-loss. Larger the positive spread, the larger the reward but comes at greater risk of getting your order stuck and forcefull closed at a loss.

Stop Loss

Across all three modes, the Stop Loss setting allows you to set your maximum acceptable loss as a percentage of your margin. The bot monitors your profit/loss in real time and automatically cancels all orders if your net loss reaches this threshold, then closes any remaining positions to ensure zero directional exposure.

How It Works:

The bot continuously monitors your net PnL (realized and unrealized). The stop loss threshold is calculated as a percentage of your margin allocation:

• Formula: Max Loss = (Stop Loss % ÷ 100) × Margin

• Example: With a 5% stop loss and $1,000 margin, your Max Loss is $50. If your net PnL drops to -$50, the bot automatically cancels all orders and closes positions.

• 100% means you are willing to lose the entirety of your inputted margin from market making losses.

Losses from market making typically accumulate when one-sided exposure building up due to lack of fills from the opposite leg, and the market moves against your one-sided exposure.

⚠Risk Warning: Stop Loss may not prevent liquidation when using high leverage (>20x). During extreme moves, the exchange can liquidate your position before the stop loss triggers, especially if the bot is stuck with one-sided exposure. This can result in losses exceeding your Max Loss. Exercise caution with high leverage, particularly in volatile markets.

Grid Reset Threshold

The Soft Reset acts as a "circuit breaker" before your Stop Loss triggers, giving your position a chance to naturally rebalance without forcing a full exit.

Behavior: When the market drifts from your last executed price (exposure price) by the configured threshold, the bot temporarily switches the "behind" leg (the side with less executed volume) from grid pricing to mid-market pricing. This helps the unfilled leg execute and rebalance exposure, potentially avoiding a Stop Loss trigger.

How It Works:

1. Normal Operation: Bot quotes based on your last executed price (Grid Mode).

   1. For example (assuming Grid 0): Bot last bought BTC at $90,000, it will place a sell limit order at $90,000

2. Soft Reset Triggered: When price drifts by your configured percentage, bot temporarily switches to quoting on mid-market price

   1. Continuing from the same example: Bot is waiting to reduce it's long position, but BTC price falls below 90K. Instead of trying to sell BTC at $90,000, it places a sell limit order at the mid-market price instead.

3. Position Resets: The unfilled leg has a better chance to execute at current market levels

4. Return to Normal: Once exposure rebalances, bot returns to Grid Mode behavior

What Each Setting Means:

• Lower Number = More Conservative: Grid Reset triggers earlier, giving the position more chances to rebalance but potentially sacrificing some profit potential.

• Higher Number = More Patient: Grid Reset triggers later, allowing the market more room to revert but accepting deeper unrealized losses before intervention.

The red and green numbers on the order monitoring page show the price levels at which Grid Reset triggers, based on your configured threshold as the order is live.

How to Read Them:

• Green Number: When you're overexposed on the sell/short leg, the green number shows the price level the market must rise by before Grid Reset triggers. The bot will then try to close this short (through passive limit orders) at the prevailing mid price, preventing further losses.

• Red Number: When you're overexposed on the buy side, the red number shows the price level the market fall by before Grid Reset triggers. The bot will then try to close this long at the prevailing mid price, again preventing furthere losees.

Pros:

• Provides some breathing room for adverse price movement before hitting hard stop loss

• Increases chances of completing round-trip trades in trending markets

• Helps avoid premature exits while still maintaining risk control

Cons:

• Incur a loss.

• May execute at less favorable prices compared to waiting for full reversion

• In strongly trending markets, even the soft reset might not prevent eventual stop loss

When to Use:

• Off: In choppy, range-bound markets where you expect mean reversion and don't need early intervention

• 25-50%: In moderately trending markets where you want insurance against one-sided exposure

• 75%: In volatile markets as a last-resort mechanism before hitting the hard stop

Blend

Blend Mode allows you to quote based on a blended price that averages your native exchange's mid price with a reference price from a more liquid or stable market. This is particularly useful when trading on less liquid exchanges where local price volatility may not accurately reflect market pricing.

Behavior: Instead of quoting purely based on your chosen exchange's mid price, the bot averages it with a reference price from another exchange (typically a larger, more liquid venue). Orders adjust as both prices change, helping your bot position its limit order for mean reversion when your chosen exchange prices diverge from the broader market.

You're still market making on your original exchange, but your quotes are informed by the reference market's pricing.

Use-case:

For a given asset, price should theoretically be the same on different exchanges, however in practice there is often minor divergences. Occasionally these price divergences could be particularly large especially between smaller exchanges and bigger ones, or for less liquid tokens across different exchanges.

By blending with a more liquid reference market, your bot quotes at prices that anticipate convergence rather than following potentially misleading local movements.

Example Use Case:

You're market making ETH:PERP-USDT on a smaller exchange where:

• Local mid price: $2,000 (but volatile due to thin liquidity)

• Reference price (larger exchange): $2,050 (more stable, higher volume)

• Blended price: $2,025

Your bot quotes around $2,005 instead of $2,000, positioning to profit when the smaller exchange's price converges toward the larger market's price.

Numerical Examples of Spreads

Example with Mid Price + 5 bps:

• Reference Price (Mid): $50,050

• Buy Limit: $50,050 × 0.9995 = $50,024.98

• Sell Limit: $50,050 × 1.0005 = $50,075.03

• Profit per unit: $50.05 (minus fees)

Example with Grid Mode + 1 bps:

• Sell executes at: $50,000

• Buy Limit: $50,000 × 0.9998 = $49,990 (2 bps below sell's executed price)

• Gap maintained: $10 between the limit prices

• If buy executes at $49,990, profit = $10 per unit (minus fees)

Example with Grid Mode + 0 bps:

• Sell executes at: $50,000

• Buy Limit: $50,000 (no spread adjustment)

• Both legs can execute at the same price, but the limit prices maintain the grid structure

Directional Bias Control

Directional bias control allows you to influence the timing and distribution of your buy and sell orders based on your market outlook.

How Directional Bias Works

• Long Bias: Favors long positions by front-loading buy orders and back-loading sell orders

• Short Bias: Favors short positions by front-loading sell orders and back-loading buy orders

• Neutral: Equal timing distribution for both buy and sell orders

Additional Notes on Directional Bias

• Alpha Tilt Adjustment: Directional bias maps linearly to alpha tilt adjustments (±1 → ±0.2 alpha tilt)

• Buy Orders: Positive bias adds positive alpha tilt (front-loads), negative bias adds negative alpha tilt (back-loads)

• Sell Orders: Positive bias adds negative alpha tilt (back-loads), negative bias adds positive alpha tilt (front-loads)

• Risk Management: Extreme bias values (±1) require up to 20% additional margin to account for increased directional exposure

Use Cases

• Bullish Outlook: Set positive bias to capture upward price movements more aggressively

• Bearish Outlook: Set negative bias to benefit from downward price movements

• Market Neutral: Keep at 0 for balanced market making without directional exposure