Customizable Strategy Parameters
The customization of strategies is an essential pillar in the management of agent pools, forming the bedrock of proficient market making. By dissecting market conditions and projections, we can delineate strategies into three principal classifications: bullish, bearish, and neutral. Furthermore, when factoring in elements such as fee structures, price spreads, and other critical parameters, strategies may be stratified into radical, conservative, or balanced approaches. To enhance strategic decision-making, Mount Exchange offers advanced customizable templates for pool creators, enabling a tailored approach to strategy formulation during the pool creation phase.
Price Spread
The price spread, often called the bid-ask spread, is the difference between the bid and ask prices for the same asset. In Mount Exchange, where market prices are derived from blockchain oracles, natural spreads don’t occur. To encourage market making, we introduce the price spread as a customizable parameter within the pool strategy. This allows pool owners to dynamically adjust bid and ask spreads according to market conditions.
The price spread (bid-ask spread) can be calculated as follows:
When the spread is given as an absolute value:
Ask Price for Long Position: [ p_a = p_o + s_a ]
Bid Price for Short Position: [ p_b = p_o + s_b ]
Where:
( p_a ) is the ask price.
( p_b ) is the bid price.
( p_o ) is the oracle price.
( s_a ) is the ask spread.
( s_b ) is the bid spread.
When the spread is given as a percentage:
Ask Price for Long Position: [ p_a = p_o \times (1 + s_a%) ]
Bid Price for Short Position: [ p_b = p_o \times (1 + s_b%) ]
Where:
( s_a% ) is the ask spread percentage.
( s_b% ) is the bid spread percentage.
In both cases, the order matching engine of Mount Exchange will use these prices to determine the optimal price for each trade.
Trading Fee Structure
Trading fees are crucial for both traders and market makers, influencing profitability and strategy execution. Mount Exchange adjusts trading fee tiers based on prevailing market conditions and volatility. Market makers can choose appropriate fee rates within a defined range, depending on their pool strategy. Higher trading fees might be preferable for low-risk strategies, as they lead to less competitive pricing and a reduced frequency of order matching.
The trading fee is determined by the following formula:
Fee rates are categorized into four tiers based on the type of transaction: OPEN MAKER, OPEN TAKER, CLOSE MAKER, and CLOSE TAKER.
Position Closure Criteria
Position closure criteria allow market makers to autonomously manage their positions. At the outset, Mount Exchange offers two key parameters: Take-Profit (TP) and Stop-Loss (SL). For example, setting a take-profit level of 0.1% for a liquidity pool will automatically close the position once this profit threshold is achieved. Likewise, stop-loss conditions help mitigate risks by closing positions when losses reach a predefined limit. It’s important to note that position closure requires confirmation from a corresponding order and is an option exclusively available to pool owners.
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