Strategy Type

Market Making Strategies

Spread-Based Liquidity Provision

Market making strategies provide liquidity by continuously placing bid and ask orders around the current price. Profits are earned from the bid-ask spread while managing inventory risk and adverse selection.

2 algorithms1 libraries

Algorithm Network

How market_making algorithms connect across libraries

🏦Market Making

🤖

Hummingbot2 algos

pure_market_makingintermediate

avellaneda_market_makingadvanced

Trading Decision Pipeline

How market_making algorithms work together in a trading system

📊

Spread Calculation

Bid-ask width determination

Base spread from volatility

Inventory skew adjustment

📋

Quote Placement

Order book posting

Bid below mid-price

Ask above mid-price

✅

Order Execution

Trade capture

Maker order fills

Spread capture

🔄

Inventory Management

Position balancing

Target inventory level

Max position limits

🛡️

Risk Controls

Adverse selection protection

Toxic flow detection

Circuit breaker triggers

Algorithm Comparison

Compare market_making algorithms across key dimensions

Algorithm Comparison MatrixClick a column to expand details

Metric	pure_market_makingHummingbot	avellaneda_market_makingHummingbot
🎯Complexity	⭐⭐⭐intermediate	⭐⭐⭐⭐advanced
📈Prediction Type	Mixed	Mixed
⚡Training Speed	⚡⚡	⚡⚡
🎯Accuracy	📊📊	📊📊
💡Best For	General purpose	General purpose

Hummingbot

pure_market_making

Hummingbot

Market Makingintermediate

Single-exchange market making with configurable spread, order levels, and inventory management.

Speed⚡⚡

Accuracy📊📊📊

Key Parameters

bid_spread	0.01	Bid spread from mid price (1%)
ask_spread	0.01	Ask spread from mid price (1%)
order_amount	1	Order size per level

+1 more

avellaneda_market_making

Hummingbot

Market Makingadvanced

Avellaneda-Stoikov optimal market making model with dynamic spread based on inventory risk.

Speed⚡⚡

Accuracy📊📊📊

Key Parameters

risk_factor	0.5	Inventory risk aversion parameter (gamma)
order_amount	1	Base order amount

Market Making Strategies — Algorithm Reference

pure_market_making (Hummingbot): Single-exchange market making with configurable spread, order levels, and inventory management. Key parameters: bid_spread (Bid spread from mid price (1%)), ask_spread (Ask spread from mid price (1%)), order_amount (Order size per level), order_refresh_time (Seconds before order refresh). Source: https://github.com/hummingbot/hummingbot/tree/master/hummingbot/strategy/pure_market_making.
avellaneda_market_making (Hummingbot): Avellaneda-Stoikov optimal market making model with dynamic spread based on inventory risk. Key parameters: risk_factor (Inventory risk aversion parameter (gamma)), order_amount (Base order amount). Source: https://github.com/hummingbot/hummingbot/tree/master/hummingbot/strategy/avellaneda_market_making.