WHAT IS THE MARKET MAKER?
In trading currencies, market makers function as intermediaries in sales and purchases between two parties and two currencies. For example a bank will function as a market maker when it collects sellers of the US Dollar to then sell to investors who have Euros in exchange. The value of each currency is based on the current market value.
To beat the MM you need to understand the basic objectives of their activity. Overall, the MM’s are traders and their objective is to make money. This includes strategies to trade against retails traders. The major difference between them and other traders is that they have the ability, through access to massive volumes, to move price at their will. So to make money, they aim to buy at a lower price and then sell at a higher price. They achieve this by:
Inducing traders to take positions. This is achieved by using a range of price movements to ‘trick’ traders into taking a position in a given direction but then reversing it again. This means that the MM can sell a specific currency at a certain price and then buy it back at a lower price when the retail trader feels too much pain from the currency value moving backward and wanting to sell it back again (e.g. via the stop loss)
Create panic and fear to induce traders to become emotional and think irrationally. This often involves:
⋅ quick moves ⋅ spike candles ⋅ news releases ⋅ ‘inexplicable’ price behaviour.Hit the Stops and Clear the Board. This forces traders into ‘margin trouble’ and ultimately out of the game.
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