THE MARKET MAKER BUSINESS MODEL

The Market Maker Business Model

In simple terms, the Market Maker Business Model involves marking prices both up and down.

Nobody would trade if prices stayed the same all the time.

Market Makers need to induce traders to take positions.

Market Makers can’t make money unless traders are in an actual position. If traders are not taking positions in the market, then the Market Makers are not maximising their opportunity to make money.

For the Market Makers to consistently make money, they must have a repeatable system.

The Market Makers paint a picture on the chart; however, the picture they paint on the chart is a façade.

They want to induce traders to place trades and risk their capital. What you are looking at on the chart is what they want you to see.

They want and need you to be very indicator orientated and very candlestick orientated. Not looking at the big picture.

Remember that most of the indicators available are provided free.

Market Makers know what the indicators on the charts will be telling traders and, more importantly, how traders are likely to respond based on the (free) training provided by the brokers.

The Market Makers job is to accumulate orders and then move the market to release their profits.

Accumulating Orders

For the Market Makers to make money, they have to convince you to sell to them or buy from them.

It’s straightforward. If they want to buy, then they have to convince you to sell. If they’re going to sell, then they have to persuade you to buy.

They do that by creating a belief about what the price will do and a little manipulation of the charts.

They will often use “talking heads”, the Governors of central banks or Federal Reserve speakers, to ignite moves in the market price. The “talking heads” are a pivotal part of the process. They say the right things, or the wrong things, at precisely the right time.

For example, a Federal Reserve speaker will say one thing in a certain way, and the market will move in response.

The oil price is an excellent example of how the news creates beliefs.

The news is the most bullish at the top and the most bearish at the bottom, and that happens all the time.

They will often hold prices within a narrow range for an extended period to accumulate as much as possible.

They will often create a false breakout or create flags or ascending wedges, triangles or pennants, a head and shoulders pattern (or whatever you want to call the patterns they create) on the chart.

The Market Makers take the other side of every single pip of movement so that they can accumulate all they can in preparation for what is coming later.

Trapping The Retail Trader

As part of the model, one of their goals is to trap traders with losses at certain crucial times and then to squeeze them and create losses.

They want the losses to become unbearable so that you will have to stop out.

When the Market Makers have taken the other side of that trade, there’s a big profit for them.

They will then look to take back what they bought or what they sold but at a very profitable price.

They can hit the stop losses and clear the pending orders. This is often in the form of a spring or stop hunt. In effect, they clear all the pending orders and get you into trades or get you out of trades by hitting your stop losses.

The Market Makers want to force you into margin call and drawdown your account.

They know exactly where the stop losses are. They know exactly how much money is needed to blow up a traders account and force a margin call. In short, they can see everything about a traders account.

The Market Maker strategy is always very well thought out and very well planned. If you’ve ever read the book The Art of War (Sun Tzu) you know “feign weakness before you attack” is a key strategy.

It’s simple. The Market Makers devise a plan, they devise a strategy, and they execute it.

It’s not rocket science. It’s not complicated.

They accumulate orders in advance of a profit release phase.

They accumulate, they manipulate, they work orders, they mark prices up, and they mark prices down, and then they release it as part of a profit release phase. That is the Market Maker Business Model in action.

They Will Attempt To Create Confusion

When they accumulate, they need to be as covert as they possibly can.

The Market Makers don’t want to tip their hand. They need to make sure there’s no discernible direction indicated for the direction of the profit release.

They will attempt to create confusion, especially at news time.

Note they cannot repeat it the same every single time because it would be much to clear for you to identify their intentions.

They accumulate to sell at higher prices, or they accumulate to buy at lower prices. They literally take the other side of the retail traders’ position.

Just about half the forex brokers do the same. They take the other side of your trade and why wouldn’t they when they know that 90% of retail traders are going to fail.

Whether that is due to the news, the indicators (that are provided free) or the forex training (mostly free), the reality is that 90% of retail traders are in a losing position.

That, in essence, is what drives the success of the Market Makers business model. It’s highly sustainable, and it’s repeated again and again and again.