Automatic order management

Automatic order management is a crucial feature for market-making bots. It allows the bot to efficiently place, modify, and cancel orders based on real-time market conditions. The objective is to maintain a balanced inventory of assets while minimizing risk and maximizing profit.

▎Key Components of Automatic Order Management

1. Order Placement:

   • The bot places buy and sell orders based on predefined strategies and market analysis.

2. Order Modification:

   • The bot can adjust existing orders (e.g., changing prices or quantities) in response to market movements.

3. Order Cancellation:

   • If market conditions change or if an order is no longer favorable, the bot can cancel existing orders.

4. Inventory Management:

   • The bot keeps track of its inventory to avoid overexposure and manage risk.

5. Risk Management:

   • Implementing limits on losses and gains, ensuring that the bot operates within predefined risk parameters.

▎Example Code for Automatic Order Management

Here's a Python implementation of a simple automatic order management feature for a market-making bot. This code simulates the placement, modification, and cancellation of orders.

import random import time

class MarketMakingBot: def init(self, initial_capital=10000): self.capital = initial_capital self.inventory = 0 # Number of assets held self.orders = [] # List to track active orders

def get_current_price(self):
    # Simulated price retrieval
    return random.uniform(95, 105)

def place_order(self, order_type, price, quantity):
    if order_type == "buy" and self.capital >= price * quantity:
        self.orders.append({"type": "buy", "price": price, "quantity": quantity})
        self.capital -= price * quantity
        self.inventory += quantity
        print(f"Placed Buy Order: {quantity} at {price:.2f}")
    elif order_type == "sell" and self.inventory >= quantity:
        self.orders.append({"type": "sell", "price": price, "quantity": quantity})
        self.capital += price * quantity
        self.inventory -= quantity
        print(f"Placed Sell Order: {quantity} at {price:.2f}")

def modify_order(self, order_index, new_price):
    if 0 <= order_index < len(self.orders):
        old_price = self.orders[order_index]["price"]
        self.orders[order_index]["price"] = new_price
        print(f"Modified Order {order_index}: Old Price {old_price:.2f}, New Price {new_price:.2f}")

def cancel_order(self, order_index):
    if 0 <= order_index < len(self.orders):
        canceled_order = self.orders.pop(order_index)
        if canceled_order["type"] == "buy":
            self.capital += canceled_order["price"] * canceled_order["quantity"]
            self.inventory -= canceled_order["quantity"]
        else:
            self.capital -= canceled_order["price"] * canceled_order["quantity"]
            self.inventory += canceled_order["quantity"]
        print(f"Canceled Order {order_index}: {canceled_order}")

def run(self):
    while True:
        current_price = self.get_current_price()
        print(f"\nCurrent Price: {current_price:.2f}, Capital: {self.capital:.2f}, Inventory: {self.inventory}")

        # Example order management logic
        if current_price < 100:
            self.place_order("buy", current_price, 1)  # Place a buy order
        elif current_price > 102 and self.inventory > 0:
            self.place_order("sell", current_price, 1)  # Place a sell order

        # Randomly modify or cancel an order for demonstration
        if self.orders:
            action = random.choice(["modify", "cancel"])
            if action == "modify":
                index_to_modify = random.randint(0, len(self.orders) - 1)
                new_price = current_price + random.uniform(-1, 1)
                self.modify_order(index_to_modify, new_price)
                elif action == "cancel":
                    index_to_cancel = random.randint(0, len(self.orders) - 1)
                    self.cancel_order(index_to_cancel)

            time.sleep(2)  # Wait for 2 seconds before the next iteration

# Example usage
if __name__ == "__main__":
    bot = MarketMakingBot(initial_capital=10000)
    bot.run()

▎Explanation of the Code

1. MarketMakingBot Class: This class implements automatic order management functionalities.

2. get_current_price(): Simulates retrieving the current market price.

3. place_order(): Places a buy or sell order based on the current price and available capital or inventory.

4. modify_order(): Modifies an existing order's price.

5. cancel_order(): Cancels an existing order and adjusts capital and inventory accordingly.

6. run(): Continuously monitors the market price and manages orders based on predefined logic.