Strategy guide
What a market-making bot really does
It quotes both sides of the book and earns the turnover. The hard part is not placing orders: it is not losing on the ones that get filled.
The job in one paragraph
A market maker puts a buy just below the current price and a sell just above it, then keeps both moving as the market moves. When someone crosses the spread, the maker takes the other side, and the aim is to close that position quickly and put fresh quotes back in the book.
The income is turnover, not a view on where the price goes. A maker who is right about direction has stopped market-making and started trading.
- Two live orders, refreshed continuously.
- Profit comes from volume passing through, not from being right.
- Every filled order is inventory that has to be cleared.
Why the spread is not the profit
On liquid perpetuals the spread is usually one tick, which on a major pair is a tiny fraction of a basis point. Measured against what a full round trip actually costs, capturing that spread is nowhere near enough on its own.
The number that decides everything is what happens to the price right after you get filled. Buy from someone who knows something, and the price keeps falling. That gap, not the spread, is where a market-making book lives or dies.
- A one-tick spread on a major pair is worth far less than one round trip costs.
- The real cost is the price move after your fill, known as adverse selection.
- Fee schedules matter, but they rarely decide the outcome by themselves.
Hold time is the lever nobody mentions
The single strongest driver of cost is how long inventory sits. Positions closed within seconds behave completely differently from positions held for ten minutes, and the gap between them is several times over, not a few percent.
This is why a good market-making bot is judged on how fast it clears what it just bought, not on how clever its pricing looks.
- Short holds are dramatically cheaper than long ones.
- Speed of exit matters more than the precision of entry.
- A stuck position quietly eats what hundreds of clean cycles earned.
Running one without handing over your funds
A bot needs permission to place and cancel orders, and nothing more. Vesper works on your own exchange account with a key limited to trading: it cannot withdraw, it expires on its own, and you can revoke it whenever you want.
It runs on our servers around the clock, so quoting does not stop when you close your laptop, and you can stop it at any moment.
- Your funds stay in your own account the entire time.
- The key can trade but never withdraw or transfer.
- Quoting continues day and night, and stops the second you say so.
Is market making profitable for a small account?
It can be, but the economics are about cost control rather than big wins. Each cycle earns very little, so what matters is how cheaply the bot can turn inventory over and how well it avoids the flow that runs it over.
What is adverse selection?
Getting filled by someone who knows more than you do about the next few seconds. Your order is taken and the price immediately keeps moving against you. It is the main cost in market making and it does not show up in any fee schedule.
Does a market-making bot need my private key?
No, and it should never ask for one. Vesper uses a key scoped to placing and cancelling orders on your own account, with no withdrawal rights, an automatic expiry and revocation at any time.
What happens when the market moves fast?
Quotes are pulled and repriced, and inventory is cleared rather than held through the move. A maker that keeps standing still in a fast market is the one paying for everybody else's information.