How to win the financial war against market makers? Is it possible to outsmart them?
Can you learn what’s going on in the mind of big bodies? Do MMs ever lose money?
This post is for those who are struggling to figure out the answers to the questions above. It’s true being a trader our rank and status of information is much lower than market makers. Still, we can beat them. How?
Learn trading forex-like market-making?
If we want to trade in a market maker’s style it is possible. But if we want to trade with the same power and rights that market makers have, we surely can’t trade like that. They are well informed and big bodies as compared to retail traders. But we can outsmart them by following certain tips.
Many traders quit forex because they fail to understand what’s going on in the mind of brokers as well as market makers. How do they turn the tables in just a moment? The whole mechanism of forex is far more than learning the basic of trading.
Keep going to read 5 tips to trade like market makers!
What are Forex Market Makers
In the foreign exchange market, retail traders can’t enter into trading directly as they don’t have enough strength and rights. They have to rely on market makers throughout their trading journey.
Market makers are the people who are continuously buying and selling currency at an openly quoted price. Hence, they are market makers as they quote two-way prices in a certain currency pair.
Simply they are middlemen between retailer traders and brokers. They are brokers in a broad sense. As they tend to sell currencies in the OTC market so they provide direct and indirect services to brokers who work under them.
How Do Market Makers Work
The role of market makers in forex is complex. Simply whenever retail traders sell currency, market makers buy it. Similarly, when retail traders buy money, the market makers sell it.
Below are the main roles of market makers in forex:
- Set bid and offer prices of certain currency pair
- They are committed to accepting deals within their set rules
- They can pass on the risk to other traders who think oppositely. However, this is impossible in a less volatile market
How to Trade Like A Market Maker
Is it possible to trade like market makers? If we want to trade in a market maker’s style it is possible. But if we want to trade with the same power and rights that market makers have, we surely can’t trade like that.
They are well informed and big bodies as compared to retail traders. But we can outsmart them by following certain tips.
First of all, it’s important to note that retail traders can never trade like market makers. They can only outsmart them in various tricks.
As market makers are big bodies, they are price makers. They have the right and enough control over the financial market. Below are a few ways to win the market traders or trading like them.
Market maker makes money using the spread manipulation and trade against the retails trader. We already know that the forex market is a zero-sum game. If anyone wins any trader, on the other part someone certainly loses.
Step-1 Understand the Psychology of Market Makers
Probably the first step to trade like MMs is to understand their psychology. They are more updated than traders. They know most of them rely on tools and indicators.
Market-making strategies, they are actually the market makers who play with our belief. They know when prices will rise.
They know more than our indicators and charts when price with getting to a lower point. They want us to make silly mistakes. They create hype in the market. They can involve artificial spikes, stop runs, artificial candles, and whipsaws during financial news.
If you get to their psychology you would come to know they love to hit stops in order to squeeze long or short trading positions.
Step-2 Understanding the Tricks Of market Makers
Market makers can trigger stops in a range.
Market makers can open the spread and can nail you on a stop.
They tend to manage your risk but, in a sense, they bundle up trades.
They have background screens to monitor the traders who are in trouble and try to get benefits out of it.
Step-3 Don’t Let Them Benefit Your Mistakes
They are waiting for our stupid mistakes. If we give them a chance by repeating the same mistake again and again, they will surely trade against us.
They are clever enough to catch our compulsive gambling move. Almost everyone is greedy to some extent in trading. But if we tend to show our weakness to them, they will win the financial war against us and we will not be able to trade like them.
Even a single wrong move can put us in trouble. So, remember, chances of mistakes are quite low in trading games.
Step- 4 Know the Time When MMs Can Put You in Trouble
You should be well aware of the time or moments when they can put you in trouble. These moments are crucial that can make you a winner or loser. So, understand these moments carefully.
Below are few trapping times in which trading like market makers is challenging:
- Beginning of the Week, Monday
- Beginning of trading day or session (30 minutes right after start are crucial)
- End of the trading day
- End of the weeks.
So, beware of this time factor. If you want to trade like market makers, you should be aware of such trapping gadgets.
Tip 5- Know Market Makers Trading Strategy
Whenever we are sure that price will rise to that point before placing an order. They are behind the scene monitoring our moves. When they feel higher trends, they tend to decrease the price beyond our prediction. This way, they make the market move according to their rules.
Market Makers Trading Strategies
Surprisingly market makers trade forex without a strategy. They say they use a business model that traders consider strategies.
Below are the top three corners of market makers trading plans or so-called strategies:
Simply accumulation refers to a general increase in buying activity. Though it’s a trick in the business model of market makers. When 95% of traders are sure that price will go down and they are willing to place trades to a certain level where they think the price can move.
But market makers know that the price will move up against the trader’s prediction. A bullish stock is a strong sign of the market being accumulated
Unfortunately, manipulation means a sudden increase or decrease in prices in order to fill the quota of market maker’s orders.
Stop-loss hunting is another general form of market-maker manipulation. Behind the scene, they are closely monitoring our trades. To make this trade go in their favor they will do whatever they can.
The break-out is a time when market makers happily welcome traders to join trades. Ever thought about why they do so?
It is the time when they use us to push the prices high. They have purchased in a bulk. Now they want to sell. But they can do so unless the prices are in their favor.
So, they would use traders in a tricky way, they will push prices up in order to sell back. The zig-zag formations are mainly due to this reason.
Do Market Makers Lose Money
Market Makers tend to make the market. They are always in a better position than traders. However, they too lose money when they fill orders and reverse the trade at a worse price.
Typically, market makers place orders filled at the best bid price and market buy orders that will be filled at the best ask price.
They also tend to lose money when they are unable to get certain information quickly. They are decision-makers and any lapse in case of information can risk their position.
If there is any problem in the IT field, market makers have to suffer their direct impact. So, they are always connected and want to stay informed.
There are many brokers who are also market makers. Experts do not recommend opening an account to the market maker broker. ICMarkets is one of the best low spread ECN brokers you can check out.
Frequently Asked Questions (FAQs)
What is the difference between market makers and brokers?
Brokers are intermediaries of financial markets who sell and buy currencies or stock on the behalf of investors. On the other hands, market makers are liquidity providers in financial markets through buying and selling stock or currencies.
Do market makers manipulate price?
Yes, market makers tend to manipulate prices. They are more updated than traders. In order to pull orders to certain limits, they tend to manipulate prices a bit. When they want to sell, they would manipulate prices so that traders buy at high prices.
Dear Trader! This post will push you to trade like a market maker. From here you will come to know how MMs can go against you. How they can play with your psychology. The only way to win them is to give them less chance to take your money.
If you tend to repeat the same mistake again and again, they are happy. But if you want to be a financial war winner, you should try to beat brokers and market makers. It’s possible if you follow the tips mentioned above.
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