What are the Market Makers thinking?

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newark18
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What are the Market Makers thinking?

Postby newark18 » Sun Mar 21, 2010 4:49 am

has there been an in depth discussion on market makers and how and why they move the market? if so, can someone please help me locate it? the backgrond on zlines made me wonder how MM affect the market. ONe question: can market makers actively buy on the ask and sell on the bid? or can they only make markets? This question may lead to other ones depending on the answer.

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Postby newschool » Sun Mar 21, 2010 4:29 pm

I believe the goal of the MM is always the same, they want the price to move them way, but to be alone in the trade.

IE: They are long and price goes up , and now everybody wants to buy from them. By being the seller at a higher price, they have a guaranteed profit. But the buyers don't.

Thus why the MMs are always looking to grab the SLs or make false breakouts/reversal to trap others. They want to be alone in profit.

IMO.

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Postby newark18 » Sun Mar 21, 2010 5:20 pm

Ok I think I understand why they make false breakouts. If they create a false long breakout, they can accumulate a position in the beginning of the breakout and hope that the breakout pushes the price so that they can sell at a higher price. My guess is that they are taking advantage of the herd mentality of the other traders. Create fear and cause a shift in price.

Can you go into why they want to grab SLs or make false reversals? I cannot seem to understand it conceptually. Thanks.
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Postby TheRumpledOne » Sun Mar 21, 2010 5:23 pm

IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!

Please do NOT PM me with trading or coding questions, post them in a thread.

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Postby es/pip » Sun Mar 21, 2010 5:29 pm

newschool wrote:I believe the goal of the MM is always the same, they want the price to move them way, but to be alone in the trade.

IE: They are long and price goes up , and now everybody wants to buy from them. By being the seller at a higher price, they have a guaranteed profit. But the buyers don't.

Thus why the MMs are always looking to grab the SLs or make false breakouts/reversal to trap others. They want to be alone in profit.

IMO.


yeah i agree pretty much with that

i am not sure there is a MM in forex--- such as there is in say AAPL---- but pretty much the same thing in a way

you have buyers and sellers, s/r (including extremes)

you have the guys that move the markets--- the pros

you have everyone else

price comes into support--- the pros start buying into support as everyone else is shorting into it ( bec they follow the heard). the market moves up into resistance and the pros sell their longs and start to get short--- as everyone else is buying( bec they follow the heard)

why?

who the hell knows---- lol

it is human nature to follow others

so when everyone is buying everyone else starts buying bec they fear they will miss the move so they end up buying into resistance

when you are standing at a cross walk and the sign says do not walk. All it takes is one guy to look both ways and see there are no cars coming. He starts to cross the road, and then everyone else will start to follow him without even looking. When standing at the cross walk and the sign turns to walk, as soon as the first person makes the move then other follow him, also without looking to check and see if the walk sign has changed.

people buy when other people buy, and they sell when other people sell.


i am not saying you just fade every move :wink:
Bend over and assume the position for another 4 years of hope and change.

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Postby es/pip » Sun Mar 21, 2010 5:32 pm

newark18 wrote:Ok I think I understand why they make false breakouts. If they create a false long breakout, they can accumulate a position in the beginning of the breakout and hope that the breakout pushes the price so that they can sell at a higher price. My guess is that they are taking advantage of the herd mentality of the other traders. Create fear and cause a shift in price.

Can you go into why they want to grab SLs or make false reversals? I cannot seem to understand it conceptually. Thanks.



making false breakouts and grabbing stops---why?

because that creates more liquidity for them to put on positions--- taking the other side of the stops and selling to the breakout guys

then when they push it down the other people sell to help move their position their way
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Postby newschool » Sun Mar 21, 2010 6:06 pm

es/pip, thats why I give more importance to trendlines than s&r , in forex.

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Postby es/pip » Sun Mar 21, 2010 6:27 pm

newschool wrote:es/pip, thats why I give more importance to trendlines than s&r , in forex.


why?

i am not sure i understand that

you favor trend lines over S/R?

i dont really use trend lines at all---- by no means am i saying i am right and you are wrong

but can you explain what you mean so i understand?
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Postby newschool » Sun Mar 21, 2010 9:20 pm

well I believe s&r are more linked to fundamentals than anything...

In stocks, its easier to compare the current price vs how the company was doing few months ago, considering if the company is selling more or less products for example.

I think that in forex, really grasping the economy of a whole country cannot be very precise, and the s&r are less reliable than in stocks...

So basically the only worthy s&r in forex would be monthly... or even yearly..

Thats what I think I see by trading both markets...

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Postby es/pip » Sun Mar 21, 2010 9:26 pm

newschool wrote:well I believe s&r are more linked to fundamentals than anything...

In stocks, its easier to compare the current price vs how the company was doing few months ago, considering if the company is selling more or less products for example.

I think that in forex, really grasping the economy of a whole country cannot be very precise, and the s&r are less reliable than in stocks...

So basically the only worthy s&r in forex would be monthly... or even yearly..

Thats what I think I see by trading both markets...



i disagree as far s/r is concerned via forex----- as i have shown in my charts and trades----

but it doesn't make me right

i was just curious as to why you saw it that way

thanks
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