Camille92
commented
7 years ago More development on the idea. The goal of a market maker bot is to make money by both selling and buying a product at the same time.
The difficulty is to guess what is maximum price investors are willing to pay me my BTC and what is the minimum price they are willing to sell me those their BTC at any given time.
The simplest strategy is to always be on top of the market at any given point, doing so you're going to make a lot of trades but with a very small share of profit. Also, another bot on the market might compete with you and that will drastically reduce profit for the two bots.
In order to not fall into excesses we have the 'width' parameters that prevent from buying and selling with a too small profit. However the market change quickly and those settings not as they have to be changed manually.
In time of big price movement you can expect more from the market as the price is evolving a lot. When it's calm you might want to take advantage of very small profits rather than nothing.
In the current state of tribeca the ewma security setting can help, as it will protect from selling too low or buying too high during a price swing. However it has a serious drawback: if it's not a price swing but a real movement it will prevent tribeca from getting rid of its coins or to jump on a move.
The proposed solution here is to have an evolutionary width based on what the market is actually willing to spend for that. Or at least trying to guess it. By using the standard deviation of the price, we know how much the price moved from its mean on average during the last 20m.
There is two ways to implement this feature: The first one is to use a modified version of the famous Bollinger bands, by reporting the standard deviation of the price above and under the 20mn simple moving average of this price. This would give us a price that should be the target (if superior to the width settings).
Ie: If the SMA 20 = 1200 and Sdev = 2 You buy at 1198 and sell at 1202.
However this can suffer a bit from the same drawbacks of the ewma security as it is based on a moving average. Also this would not give us an interesting information during quick price move.
If we take the same example, once the price reaches 1203 the security would still have 1202 as a target.
The second and in my opinion best solution is to report the Sdev from the Fair value calculated from tribeca. Using the same example if the price is at 1200 and Sdev = 2 Tribeca buys at 1198 and sell at 1202. However if the price moves to 1203 Tribeca will then try to sell at 1205 and buy at 1201.
ctubio
beegmon
Hi Carles and everyone,
Couldn't sleep but just got what I believe might be a simple and great idea! This would act like the EWMA safety but in a more clever way imho.
The idea is to use standard deviation of the price as a safety for defining the width. 20 period is the most commonly used value (BB bands etc) so it might be good just to start with that and maybe change it later.
The standard deviation is not very hard to calculate and is a very useful tool to measure how much a price moves from its mean.
We need to calculate the SMA(20) = the average of the price on close on a 20mn period Then substrat this mean to the 20 composing the moving average and square them. Lastly to find the average of this number and find the square root of it.
You can see at the bottom of thus chart what the value would be for the above period. It has the ability to move quickly from a period with big change to very calm time.
At the end we get, like for the ewma protection a minimum value that should protect from bad trade even if the width is set to be smaller.
Lastly it can be used for defining the bullets of AK47. For instance with 2 bullets the second one could be at Standard deviation * 2 from fair value!