Market Making Strategies
Market Making Strategies 📈
Market making is the practice of providing liquidity to a market by placing both buy and sell orders. Here's how it works and how you can benefit.
What is Market Making?
Market makers continuously quote both bid (buy) and ask (sell) prices, earning the spread — the difference between the two prices.
The Spread
The spread is your profit as a market maker:
Spread = Ask Price - Bid Price
Profit = Spread × Volume Traded
Key Strategies
1. Passive Market Making
Place limit orders at strategic price levels and wait for them to be filled. Low effort, steady returns.
2. Active Market Making
Adjust your quotes dynamically based on order flow, volatility, and inventory. Requires constant monitoring.
3. Inventory Management
Keep your portfolio balanced. If you accumulate too much of one outcome, adjust your quotes to encourage opposite trades.
Risks
- Adverse selection — Being picked off by informed traders
- Inventory risk — Holding unbalanced positions
- Volatility risk — Rapid price moves against your positions
Getting Started on Ape Exchange
- Open the orderbook for any market
- Look at the current bid-ask spread
- Place limit orders on both sides
- Monitor and adjust as needed
Remember: market making is a volume game. Small, consistent profits add up over time.