Trading

DEXBot, the market making Bitshares crypto trading bot

August 20, 2019

DEXBot is an open-source crypto trading bot, designed by the BitShares community to provide liquidity on more than 15 exchanges, including Bitspark’s Sparkdex, that use the BitShares blockchain. The bot was activated early in 2018 after the developing team received funding for the project.


Overview of the crypto trading bot

By its definition, DEXBot is a market maker, not a market taker i.e. it places orders with an aim to get in and out as quickly as possible. In essence, the job of the market makers on exchanges is to increase the competition on bid and ask prices, which then results in narrowing the spreads.


DEXBot



DEXBot can be used to automatically trade any assets available on the Bitshares blockchain, including Bitspark’s Sparkdex. At this point in time, there are more than 15 exchanges built on BitShares blockchain that can use DEXBot for automatic trading. 


Installation

The installation of DEXBot is fairly straightforward. Two major advantages of the DEXBot are that is 1) Free for use, and 2) Available for Windows, OSX and Linux. The latest versions of the software are available on Github

Once downloaded, just follow the usual steps to install a software. After the installation is completed, the software will ask you to choose a password, which will be used later to input your keys so that DEXBot is allowed to make changes to the blockchain. DEXBot has both GUI and command line interface.


Crypto trading strategies

As a market maker, the DEXBot is designed for adding orders to the books, increasing the liquidity of a crypto asset with the ultimate aim of making a profit. DEXBot allows two types of orders (crypto trading strategies): staggered and relative. 


Staggered orders 

This crypto trading strategy is used to place a large amount of buy and sell orders in order to fill up the order books, including the coverage of all conceivable prices e.g. -100% to +100%. As an operator, you select the range you want covered as well as increments that you want the orders to be spaced apart by. In addition, you can set the amount, spread, bounts, as well as base and quote requirements. 

In essence, this crypto trading strategy provides the market with depth and makes it more solid. 

It is designed in such a way that it closes trades at a profit and never in red. As such, profits from each profitable trade are spread across all orders. The more successful trades the DEXBot makes, the larger the following orders are as the bot immediately reinvests the profits from the previous trade.

It is important to highlight that DEXBot can operate offline as well, as this element has no significant impact on the profitability of the strategy. There are five different modes that DEXBot can operate in: 

  1. Mountain - concentrating funds around the spread, 
  2. Valley - thrives on high volatility as it concentrates the funds near range extremes,
  3. Neutral - a mix between mountain and valley. Works well in stable market conditions,
  4. Buy slope - order sizes are fixed in the BASE asset,
  5. Sell slope - order size are fixed in QUOTE asset.

In general, the staggered orders strategy is seen more as a long-term trading strategy that only pays off in the long run, provided the crypto bot is left untouched. In addition, it requires an uncertain and more volatile market to bring profit to the table. 


Relative orders

Unlike staggered orders, the relative orders strategy is a better fit for more active traders applying short-term trading strategies. The operator must monitor the strategy almost all the time and provide certain adjustments based on the inputs he receives. In essence, it places a buy order below the centre price and a sell order above the centre price. The entry price depends on the defined spread.

Compared to staggered orders, this strategy requires calm, liquid and stable markets that are ranging most of the time. so, it makes a profit from the spread, attempting to frequently buy low and sell high and that’s the exact reason for which higher spreads, available in the less volatile market conditions, are required. 

In contrast to staggered orders, the relative orders bot must be online all the time to operate this strategy. Before applying the bot, certain parameters must be setup in the first place: 

  • Spread (the difference between the bid and the ask price) 
  • Centre price (the reference price for placing own orders)
  • Order size (amounts concentrated in a trade)
  • Reset options (when to reset the orders)


DEXBot: one of the better crypto trading bots, but requires experience

As a free crypto trading bot which offers a wide range of features and list of strategies, DEXBot is one of the better options available for crypto traders. In spite of the fact that it requires a solid understanding of the crypto trading process and multiple years of trading experience, DEXBot is quite straightforward. 

Two available types of orders offer different strategies for different types of traders. Depending on the market conditions, traded asset, user activity and timeframe, staggered and relevant orders provide you with a solid opportunity to make profits by trading crypto assets.  

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