Development Workflow for Market-Making AI

1. System Architecture Design

I will define components such as the data handler, decision-making engine, and trade
execution manager.

I will choose Python libraries like Pandas and NumPy for data manipulation, SciPy for
scientific calculations, and request or WebSocket libraries for handling API calls to trading
platforms.

2. API Integration
I will integrate with trading platform APIs to stream real-time market data (bid, ask,
volume) and execute trades.

I will implement functions to fetch both real-time and historical market data necessary for
analysis and decision making.

3. Data Management
I will configure a database using SQLite or PostgreSQL for storing historical data for
backtesting.

I will develop a data ingestion module to ingest, clean, and normalize incoming data for
processing.

4. Algorithm Development
I will implement functions to calculate trading indicators such as Moving Average, RSI, and
MACD using market data.

I will develop the pricing algorithm to calculate optimal bid and ask prices based on the
current market state and inventory levels.

I will code risk management strategies to handle adverse market movements and maintain
inventory balance.

5. Trading Logic Implementation

I will build the core engine that decides when to buy or sell based on input from pricing
algorithms and indicators.

I will code the mechanism to place buy and sell orders through the trading platform's API,
handling errors and ensuring timely execution.

6. Backtesting Framework
I will create a backtesting environment using historical data to simulate trading decisions
and measure the performance of the bot.
I will implement metrics such as profitability, Sharpe ratio, and maximum drawdown to
evaluate strategy effectiveness.

7. Live Testing and Deployment

I will set up a safe testing environment where the bot can run in real-time markets without
executing actual trades (paper trading).

I will develop a dashboard to monitor live trading metrics and system health in real-time.

8. Optimization and Tuning

I will continuously refine trading algorithms based on outcomes from backtesting and live
testing.

I will optimize the system for better performance, such as improving execution speed and
reducing latency.