Trading has grown in popularity in recent years. The amount of momentum was so great that more precise decisions and fast reflexes were needed. Bots were implemented as a new addition to the trading world. These trading bots may perform a variety of trading activities and are designed to increase a trader’s profit while decreasing his or her risks and losses. We will be looking at the Hummingbot trading client in this article.
What exactly is Hummingbot?
Hummingbot, our primary target, is a software client that allows users to build and deploy trading bots. This is an open-source project that is also community-driven. As a result, there are nearly 4,000 active clones on GitHub and Docker downloads. Furthermore, this has been forked over 100 times on GitHub. These statistics show that many traders have faith in this app.
Hummingbot is primarily for experienced traders since you must build your own algorithmic bot to execute high-frequency trades. However, if you are skilled at creating bots, you can still use this as a beginner. Trading knowledge is also important. When using Hummingbot, you can build your bot using a variety of APIs. Hummingbot can be used in both centralized and decentralized cryptocurrency exchanges.
Hummingbot Software client functionalities
Though this can be used for a variety of tasks, it was designed to build bots that generate marketing opportunities. This makes profiting easier for the trader. If you’re not sure what “making markets” means, consider this. This bot purchases a specific cryptocurrency at a low cost. Then it seeks to find the best price for that cryptocurrency and sell it for the highest possible benefit.
There are several other features available when using the Hummingbot software client, including Paper Trading Mode, Balance Limit, Minimum Order Size, Performance History, Kill Switch, and Arbitrage. Let’s take a look at each of these and see what they offer the customer.
Mode of Paper Trading
The Paper Trading Mode is extremely useful when trying out your trading bot or learning how to use one of the bots. In this case, you will put your bot in a simulated market environment where it can make decisions and test its results. You will not lose money if you use this to test your bot.
You can use this to restrict how many assets your HummingBot can use on an exchange or in a wallet. This is especially important when trading with multiple bots. This is also essential if you are attempting to retain any of the assets without selling them.
Minimum Order Quantity
This function will assist you in determining the order amount for the Hummingbot. This ensures that orders are placed when the technique is used for various exchanges or pure market making.
This is an analytical tool that will enable you to display the current period of total past trades, asset inventory, and other informative track records of your trading history with Humminngbot.
The Kill Switch
This is an important aspect of the Hummingbot app client. When you exceed a certain limit or a certain threshold, you can fully disable the bot. This threshold can be either positive or negative. Even if you win or lose, you can enforce a kill switch that will shut down the bot if the specified value is exceeded.
This allows you to benefit from trading the same cryptocurrency on several exchanges at the same time. This is due to the fact that different markets can list assets at different prices. This will greatly help expert traders.
Exchanges and operating systems that are supported
Even though the features are fantastic, the client’s operating system is also essential. Hummingbot is compatible with Windows, Mac, and Linux.
Furthermore, this bot client supports the majority of the major exchanges, including but not limited to Binance, dYdX, and Kraken.
Is Hummingbot safe to use?
As previously said, Hummingbot is an open-source project, so it is a local client. Using private APIs, you connect the bot to exchanges and wallets. As a result, transactions and data stored in the bot’s files are as safe as those on your own computer. Other than the Hummingbot corporation, there are no external data storages for your bot.
Is Hummingbot simple to use?
This software client is by far the fastest and most straightforward trading bot to use. This does not imply that you can simply download and run the bot without any prior knowledge of trading. However, in comparison to other crypto trading bots, Hummingbot is the simplest to set up.
How Do Hummingbot’s Prices Work?
Hummingbot is a community-driven open-source project. As a result, no pricing schemes are involved. It is completely free to use.
Hummingbot Mining for Liquidity
Liquidity mining works in almost the same way as traditional crypto mining. In this case, the miner will be rewarded in different ways for creating markets. To put it plainly, exchanges compensate miners for keeping orders and exchanges on their books.
Your primary objective with Hummingbot should be to integrate bots for market making. While creating markets for yourself, you can also earn money by mining liquidity.The benefits of this strategy are dependent on three major factors. They are as follows:
1. The quantity of order,
2. The Distribution of your Orders (Range from average. )
3. The order’s validity period.
You must be logged in to use any of these features.
How to Begin with Hummingbot
You will be downloading and installing Hummingbot’s code on your computer. As a result, you are not required to build an account on Hummingbot. However, you must link the bot to exchanges with private APIs.
Make API Keys
The first step is to download and install the app client on your computer. Simply go to Hummingbots’ main page and click on “Get Started.” A page will open with all of the steps necessary to install Hummingbot on your computer.
Build the APIs in your wallet. You will also need the trade API and the liquidity miner API.
Setup Hummingbot Miner
You can bind Hummingbot to your exchange using the APIs. This stage, where you configure the miner, is entirely optional. However, this is a method of earning rewards by interacting with the bot. As a result, you will be able to raise money without doing any extra work.
That is why we suggest configuring the miner. You will need your read-only key to configure the Hummingbot Miner, which you can obtain from the exchange itself. Enter the key, and the miner will be linked to the exchange that is monitoring the transactions.
The installation of the bot is the most important step in this process. Simply go to the Downloads tab on the Hummingbot main page and download the version that corresponds to your operating system.
Create a Market-Making bot.
To create a bot, you must first bind your exchange to the Hummingbot CLI. To do so, enter Connect [exchange] to the CLI. Replace [exchage] with yours in this command. For example, type Connect Binance, and the client will request your API. You will be linked to the exchange after providing your information.
After that, you must design the bot that will be used.
Begin by typing Create into the CLI, followed by your market making strategy. You are free to employ any technique. For the time being, we’ll stick with pure market making. Simply type the first few letters, and Hummingbot will fill in the rest with suggestions.
The client then requests the exchange and the pair for which you will be trading. At this point, you will be asked for the exchange name. You can use all of the exchanges that are linked to you. Then, in this type, you can choose the currency pair to use – ETH-USDT or BTC-ETH.
The bot will then request the method parameters. These are given the instructions and must therefore obey them precisely.
You are now ready to launch your first Hummingbot market creation process! You can save your configuration by giving it a name and typing it. Type Start to begin market making
Advantages and disadvantages
Here are our thoughts on the key benefits and drawbacks of using the Hummingbot.
- Open source, free, and community-driven
- Can connect to most major exchanges
- Simple to set up a bot and trade
- Liquidity Miner
- If you are a novice, you would be unable to incorporate a bot.
- Support material is somewhat minimal.
Analyzing the above benefits and drawbacks, it is clear that Hummingbot is extremely beneficial to an experienced trader. However, it is not particularly user-friendly for beginners. You can quickly execute your bot if you understand the fundamentals of trading and the commands associated with the bot client.