Who is the MARKET MAKER and how they manipulate the market ?!!!!
-WHO ARE THESE PEOPLE, WHY ARE THEY SO MEAN AND MANIPULATIVE
-I SWEAR I WILL NEVER TRADE CRYPTO AGAIN ITS ALL PUMPS AND DUMPS
-AAAGGHHH NOT AGAIN....they stop hunt me again and I am rekt once more.
-THESE MARKET MAKERS ARE FULL OF ---- .
yup, we have been all there my friends I get your feelings, I really do! but you think market makers are evils and are here just to manipulate the market? for real?
bare with me for a couple of minutes and I will break it down for you.
WHO IS THE MARKET MAKER
A market maker is a simple man, but this simple man has a lot of money and with a great amount of money, comes great amount of power.
let me borrow a sentence from 'investopedia' so I can introduce you to this simple man:
"The term market maker refers to a firm or individual who actively quotes two-sided markets in a particular security, providing bids and offers (known as asks) along with the market size of each. Market makers provide liquidity and depth to markets and profit from the difference in the bid-ask spread."
did you notice that? "Market makers provide liquidity and depth to markets.."
so it is fair to say that their existence is crucial for every market. without market makers, there may be insufficient transactions and fewer investment activities, which means you can not buy your favorite altcoin/asset at a certain price because there is no one willing to sell to you.
it's simpler than you think, market makers provide deals in the market, they offer 'x' amount of securities at a given price (bid) and also offer to sell 'x' amount of securities slightly higher than where they bid (ask).
When an investor initiates a trade they will accept one of these two prices depending on whether they wish to buy the security (ask price) or sell the security (bid price).
I also borrow the last sentence from 'investopedia' xoxo
HOW DO MARKET MAKERS MAKE PROFIT?
the difference between their bid price and ask price is what we call 'spread'.
if the bid price of a stock is $10 for example, and the asking price is $11, then the spread is $1 (or 9%).
if I buy one share of that stock at 10 and sell it at 11 I will put $1 in my pocket as profit. but market makers make a trade with spreads as low as $0.01.
why? we will get to that very soon, what important here is that even in small spreads you can make a lot of money if you are investing with A LOT of money, and boy they do have a lot of money.
as I mentioned earlier they keep the spreads really low for multiple reasons:
the obvious reason is to make the market moves slightly with a natural flow which we can witness in liquid markets such as forex or Bitcoin for instance, the orderbooks are always tight.
another reason is the exchanges that offer different market makers to come and heal their order books and 'depth'.
so there will be a domestic rivalry between market makers as well in order to execute their trades before anyone else and they will keep the spreads as low as possible.
another quote from 'investopedia' which is the sponsor of today's article (lol): "Market makers must operate under a given exchange's bylaws, which are approved by a country's securities regulator, such as the Securities and Exchange Commission (SEC)."
WHAT WILL HAPPEN IF THE SPREAD IS HIGH?
you will die..
Nope, it was a stupid joke ffs
when the spread is high the depth of the market is shallow, and when the depth is not deep enough, any player with a fat bag can move the market in any direction that they want.
what is this 'depth'? glad you asked:
"Market depth refers to a market's ability to absorb relatively large market orders without significantly impacting the price of the security." (by order of the investopedia)
Market depth can be evaluated by looking at the order book of an asset/stock/..., which consists of a list of pending orders to buy or sell at various price levels. On any given day, there may be an imbalance of orders large enough to create high volatility, even for stocks with the highest daily volumes.
are we done here? you all understand? good lets move on
BUT WHY ARE THEY SO EVIL?
It's all about business darling, a man gotta eat and feed his familia.
these market makers usually work on behalf of large institutions, and they are brokerage houses that provide trading services for investors in an effort to keep financial markets liquid. but they can also trade individually and make some profit on their own, this is where they manipulate you with fake breakouts and deviations and upthrust and springs and blah blah blah. without market makers trading won't be fun ;)
thanks for baring my none stop nonsense writing, although I put a lot of hours behind my research so I don't falsely deliver the wrong information!
so leaving a like and comment will cheer me up a lot, and although I don't have A LOT of money to be a market maker, I have A LOT of free time to create content such as this. (follow me :D)
the next article will be about the taker buy-sell ratio !!!!!!!!!
-I SWEAR I WILL NEVER TRADE CRYPTO AGAIN ITS ALL PUMPS AND DUMPS
-AAAGGHHH NOT AGAIN....they stop hunt me again and I am rekt once more.
-THESE MARKET MAKERS ARE FULL OF ---- .
yup, we have been all there my friends I get your feelings, I really do! but you think market makers are evils and are here just to manipulate the market? for real?
bare with me for a couple of minutes and I will break it down for you.
WHO IS THE MARKET MAKER
A market maker is a simple man, but this simple man has a lot of money and with a great amount of money, comes great amount of power.
let me borrow a sentence from 'investopedia' so I can introduce you to this simple man:
"The term market maker refers to a firm or individual who actively quotes two-sided markets in a particular security, providing bids and offers (known as asks) along with the market size of each. Market makers provide liquidity and depth to markets and profit from the difference in the bid-ask spread."
did you notice that? "Market makers provide liquidity and depth to markets.."
so it is fair to say that their existence is crucial for every market. without market makers, there may be insufficient transactions and fewer investment activities, which means you can not buy your favorite altcoin/asset at a certain price because there is no one willing to sell to you.
it's simpler than you think, market makers provide deals in the market, they offer 'x' amount of securities at a given price (bid) and also offer to sell 'x' amount of securities slightly higher than where they bid (ask).
When an investor initiates a trade they will accept one of these two prices depending on whether they wish to buy the security (ask price) or sell the security (bid price).
I also borrow the last sentence from 'investopedia' xoxo
HOW DO MARKET MAKERS MAKE PROFIT?
the difference between their bid price and ask price is what we call 'spread'.
if the bid price of a stock is $10 for example, and the asking price is $11, then the spread is $1 (or 9%).
if I buy one share of that stock at 10 and sell it at 11 I will put $1 in my pocket as profit. but market makers make a trade with spreads as low as $0.01.
why? we will get to that very soon, what important here is that even in small spreads you can make a lot of money if you are investing with A LOT of money, and boy they do have a lot of money.
as I mentioned earlier they keep the spreads really low for multiple reasons:
the obvious reason is to make the market moves slightly with a natural flow which we can witness in liquid markets such as forex or Bitcoin for instance, the orderbooks are always tight.
another reason is the exchanges that offer different market makers to come and heal their order books and 'depth'.
so there will be a domestic rivalry between market makers as well in order to execute their trades before anyone else and they will keep the spreads as low as possible.
another quote from 'investopedia' which is the sponsor of today's article (lol): "Market makers must operate under a given exchange's bylaws, which are approved by a country's securities regulator, such as the Securities and Exchange Commission (SEC)."
WHAT WILL HAPPEN IF THE SPREAD IS HIGH?
you will die..
Nope, it was a stupid joke ffs
when the spread is high the depth of the market is shallow, and when the depth is not deep enough, any player with a fat bag can move the market in any direction that they want.
what is this 'depth'? glad you asked:
"Market depth refers to a market's ability to absorb relatively large market orders without significantly impacting the price of the security." (by order of the investopedia)
Market depth can be evaluated by looking at the order book of an asset/stock/..., which consists of a list of pending orders to buy or sell at various price levels. On any given day, there may be an imbalance of orders large enough to create high volatility, even for stocks with the highest daily volumes.
are we done here? you all understand? good lets move on
BUT WHY ARE THEY SO EVIL?
It's all about business darling, a man gotta eat and feed his familia.
these market makers usually work on behalf of large institutions, and they are brokerage houses that provide trading services for investors in an effort to keep financial markets liquid. but they can also trade individually and make some profit on their own, this is where they manipulate you with fake breakouts and deviations and upthrust and springs and blah blah blah. without market makers trading won't be fun ;)
thanks for baring my none stop nonsense writing, although I put a lot of hours behind my research so I don't falsely deliver the wrong information!
so leaving a like and comment will cheer me up a lot, and although I don't have A LOT of money to be a market maker, I have A LOT of free time to create content such as this. (follow me :D)
the next article will be about the taker buy-sell ratio !!!!!!!!!