[In-depth Study of Market Maker Concept]-Steemit Crypto Academy | S4W6 | Homework Post for @reddileep
Hello great steemians, it's good to be back again on this week 6 Edition of the crypto academy.
QUESTION 1
Define the concept of Market Making in your own words.
Market makers basically act as wholesalers via way of means of shopping for and promoting shares to meet the marketplace – the expenses they fee replicate marketplace deliver and call for. When the call for for a protection is low and the deliver is high, the rate of the safety can be low.
The time period marketplace maker refers to corporations or people that actively proportion a bilateral marketplace in a selected security, presenting gives and gives (called inquiries) at the side of the length in their respective trading areas.
They also can make their very own trades, which can be called grasp trades.
The maximum not unusual place instance of a marketplace maker is a brokerage company that gives shopping for and promoting answers for actual property investors. It performs a massive position in retaining liquidity within side the actual property marketplace.
QUESTION 2
Explain the psychology behind Market Maker. (Screenshot Required)
Trading psychology or Psychology behind market maker refers back to the feelings and states of thoughts that assist decide achievement or failure in inventory buying and selling. Trading psychology represents the numerous components of an individual's individual and conduct that have an effect on his buying and selling actions. Trading psychology may be simply as vital as different attributes including knowledge, revel in and competencies in figuring out buying and selling achievement.
Market makers have interaction within side the inventory marketplace via way of means of presenting buying and selling offerings to traders and growing liquidity within side the marketplace. They mainly provide bids and offers for certain stocks in addition to their market size.
The extra actively a inventory is traded, the extra money the marketplace maker makes. Market Makers are often thought of as manipulating prices. "Market manipulation" is an emotional term and conjures images of a business of fraud and exploitation.
Market Maker acts as a inventory provider and presentations their costs throughout commercial enterprise hours. Prices can vary (on occasion greatly) during the day, relying on numerous influences. For example, if a completely huge shareholder comes to a decision to sell (or a aggregate of many small shareholders), the Market Maker will lessen the fee they may be inclined to pay for the inventory. The speak is likewise true; if there's a constant and huge sufficient call for for a inventory, then the Market Maker will boom the fee. Market Makers make cash through shopping for shares at a decrease fee than promoting them. This is the bid/ask spread. The extra actively a inventory is traded, the extra cash the Market Maker earns.
QUESTION 3
Explain the benefits of Market Maker Concept?
The benefits of Market Maker concepts includes:
PRICE CONTINUITY
Price continuity characterizes a liquid marketplace with exceedingly low bidask spreads. Basically, it's miles the cornerstone of a dependable marketplace creation. A marketplace maker should be capable of reveal the capacity and willingness to make expenses of any size, no matter sizable volatility. Capital commitments and specific distribution channels play an critical function in this.FLEXIBILITY AND COVERAGE
Market makers enhance their offerings via way of means of offering flexibility in some of areas. In particular, they are able to provide non-trendy agreement dates and the possibility to settle in more than one currencies.
Furthermore, as opposed to choosing only a handful of assets, marketplace makers have to cowl a extensive variety of units for his or her clients. This demonstrates the dedication of marketplace makers to purchaser satisfaction.
- TRADE CONTINUITY
Market makers want to have a non-stop presence and offer the immediacy of dealing. Whenever an asset is sold or sold, there have to be a person on the opposite cease of the transaction.
If an organization gives real-time buying and selling to its clients, a good marketplace maker will facilitate this functionality.
- INTERMIDIATARY FUNCTION.
At the start of the buying and selling session, marketplace makers need to decide the top-rated establishing price. Meaning, on-line rates supplied with the aid of using marketplace makers may be taken into consideration legitimate. For example, on marketplace prices. In this case, marketplace makers use their very own budget to make certain order balance.
QUESTION 4
Explain the disadvantages of Market Maker Concept?
Everyone must be aware about the weaknesses of marketplace makers, however they're typically most effective of hobby to superior traders. The dangers are:
An common charge shape is barely greater expensive than with out a marketplace maker. Spreads may be notably lower, however alas it's miles frequently now no longer viable for personal customers to change at once on the exchange.
Market makers that aren't well regulated, for instance within side the cryptocurrency market, can regularly play hints on clients and placed them at a disadvantage. Market makers are accountable for charge positions and this may of path be negatively tormented by synthetic unfold widening or terrible charge/charge role execution. Since CFD agents are typically usually situation to regulated authorities, that is regularly now no longer the case here, however strange occurrences have to usually be questioned.
QUESTION 5
Explain any two indicators that are used in the Market Maker Concept and explore them through charts. (Screenshot Required)
What are marketplace signs? Market signs are quantitative and are trying to find to interpret inventory or monetary index facts so that you can expect marketplace movements. Market signs are a subset of technical signs and typically include formulation and ratios.
- Bollinger Band
A Bollinger band is a trademark that gives a selection inside which the rate of an asset is typically traded. The width of the band will increase and reduces to mirror latest volatility. The nearer the bands are to every other, or the "narrower" they are, the decrease the perceived volatility of the economic instrument. The wider the bands, the extra the perceived volatility.
Bollinger Bands are beneficial for figuring out while an asset is buying and selling out of doors its typical stages and are basically used as a technique of predicting long-time period fee movements. If a fee is continuously shifting out of doors the higher parameters of the band, it can be overbought, and if it movements underneath the decrease band, it can be oversold.
Binance app
- Fibonacci retracement
The Fibonacci retracement is a trademark that could decide how some distance a marketplace is transferring towards its cutting-edge trend. A pullback happens whilst the marketplace stories a transient dip, additionally called a pullback.
Traders who accept as true with that the marketplace is set to make a flow frequently use the Fibonacci retracement to affirm it. This is as it facilitates to perceive ability help and resistance ranges that might imply a bullish or bearish trend. Since investors can perceive help and resistance ranges with this indicator, it is able to assist them determine where stops and boundaries ought to be implemented or whilst to open and near their positions.
Trading view.com
CONCLUSION
Market makers are those who make up the market. They are responsible for the flow of market and ensure transaction is carried out.
It's an awesome time to participate in this course.
CC:
@reddileep
Best Regards
@charis20