A market maker is a major player in the market that manages liquidity and prices. But many traders believe that their role is not so clear-cut. 🕵️♂️
What does a market maker do? 🔍
1. Manages the market 🎛️
The market maker creates buy and sell orders to keep the market active. However, his goal is not to help you, but to make money on the difference between the buy and sell prices.
2. Manipulates price movement 📉📈
They have the resources to artificially create 'waves' in the market. For example, they can suddenly raise the price to attract buyers and then 'dump' the asset, making a profit.
3. Profits from liquidations 💸
Market makers know where the key liquidation levels of leveraged traders are. They can direct the market to 'liquidate' positions and profit from it.
What does it look like in reality?
Example 1: Price manipulation
Let's assume the cryptocurrency is worth $10. The market maker starts actively buying assets, raising the price to $15. Seeing the increase, small traders enter the market, hoping for continued growth. At this moment, the market maker sells the assets, locking in profits, and the price sharply falls.
Example 2: Liquidation of positions
Many traders opened long positions at the $20,000 level, setting stop-losses just below. The market maker drops the price to $19,900, 'forcing' them out of the trade, and then returns the price back to $20,000. As a result, they profit from their losses.
Why is it important to know?
1. The market is not a charity
The market maker operates for their own benefit. Their goal is to make a profit, not to help you trade.
2. The market is always against the majority
Most beginners lose money because market makers exploit their emotions and ignorance.
3. Liquidity ≠ safety
Just because the market is liquid doesn't mean the price is stable. Manipulations happen even on major exchanges.
How to protect yourself?
✅Don't follow the crowd: If the price sharply rises or falls, think about who organized it and why.
✅Use stop-loss orders: But set them wisely so that market makers don't take them out.
✅Don't risk all your capital: Trade with small amounts to avoid large losses.
📝
The market maker is a skilled player who manipulates market movements for their own benefit. By understanding their methods, you can avoid traps and become a more informed trader. Be careful and think one step ahead! 🚀
#Bitcoin #cryptocurrency #CryptoNews #Ethereum #CryptoTrading