Order Execution

HydroTrade strategies are formulated by individual users referred to as "makers," featuring one or two on-chain limit and range orders. The fulfillment of a maker's orders necessitates the participation of "takers," including spot traders like direct traders on the dapp, arbitrageurs, and DEX aggregators.

The configuration of each user's strategy, the strategy's liquidity, total network liquidity in the token pair, and network congestion collectively influence the probability of execution within their strategy.

Liquidity and Ranges

Makers submit orders specifying their custom ranges dictating the prices at which they are willing to buy or sell their tokens. An order with a broader range disperses liquidity across a wider range of prices, while an order with a narrower range concentrates liquidity within fewer prices. Orders with higher liquidity concentrated at a specific price are more likely to execute when the market reaches that price.

For instance, let's consider two distinct HydroTrade orders to purchase ETH using USDC. Both orders are funded with an equal amount of USDC tokens but have different range sizes. Jen's Order A proposes to purchase ETH within the range of 1800-1900 USDC, whereas Tom's Order B offers to purchase ETH within the range of 1800-2000 USDC. Jen's order distributes the allocated budget across a tighter range, resulting in more tokens allocated per price point within the range. Consequently, when the external market price of ETH hits 1800, Jen's Order A is more likely to execute first, as it has a greater liquidity concentration at 1800 and can thus provide a more favorable price to the taker.

Gas

Gas costs are also taken into consideration when submitting spot trading requests to HydroTrade. While a maker order may offer an attractive price for takers, the associated gas costs for executing the trade could render the transaction less appealing, leading to non-execution. This principle applies similarly to arbitrageurs. Usually, an arbitrageur engages in trades on HydroTrade and executes the corresponding maker order if the arbitrage opportunity is significant enough to offset the gas costs.