DEX Masterclass 105: DEXBot trading strategies
Crypto markets are always open 24 hours per day, 7 days of the week. This means that there can be new opportunities at any point in time, even when you’re asleep. For that reason, setting up orders manually in anticipation of these opportunities is a way to position yourself favourably. Or alternatively, you can use tools to automate that for you. That’s where DEXBot comes in.
What you’ll learn
- DEXBot trading strategies
- Relative orders
- Staggered orders
- Order book depth
- More about arbitrage opportunities
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The order book is a list of buy and sell orders for a specific market. With the relative order strategy, you are putting both bid and ask orders on the book. When markets oscillate and you have trades on the order book on both sides, you are market making. This means you are positioned perfectly to capitalise on any opportunities that arise.
If you’re using DEXBot, it will automatically execute the first order that hits. DEXBot manages orders on both sides by refilling amounts on the other side of the book after orders have been taken. In an ideal scenario, you’d be selling high and buying low.
Order book depth
You can visualise the order book depth to get a better picture of the liquidity in a market. With both bid and ask side presented visually next to each other, in an ideal scenario you would see a “valley shaped” or “V shape” order book. This means there is very little liquidity right at the market price, but increasingly so when go back in order book depth.
The V shape is like that because generally people have the same amount of money but they are buying for cheaper therefore the total size of the numbers are bigger. A “mountain order book” would look like the inverse of this, like an inverted V. This means that most of the liquidity is focused right at the market price.
With staggered orders, you’re setting a number of different orders in a price range. Say you set staggered orders on one side for Zeph, and someone comes to you to sell Zeph. They would first get the best price available and then they would get progressively worse prices (from their point of view). For you, the prices only get better. Market making at its finest.
This is an interesting way to add liquidity to an order book. The benefit of staggered orders is that you can accommodate larger orders at increasingly better prices (for you). As a market maker, that’s how you make money.
Again, this may happen over night, which is another good reason for setting up the DEXBot for this type of strategy.
A market heavily influenced by staggered orders present interesting opportunities. Particularly when when big market swings take place, orders set previously create massive arbitrage opportunities. How arbitrage works is explained in more detail in DEX 104, but in this episode we briefly revisit it in relation to staggered orders.
Watch as George discovers a sizeable arbitrage opportunity between Binance and Sparkdex, where the market is wide open for anyone to make $500 per Bitcoin just by buying at one exchange and selling at another.
The lesson here is that crypto markets are always on the move and to the trained eye there are many profitable opportunities to be found.
Sharpen your skills. Never miss a trading opportunity.