[In-depth Study of Market Maker Concept]-Steemit Crypto Academy | S4W6 | Homework Post for @reddileep

olawalium (74)mutedin SteemitCryptoAcademy • 3 years ago (edited)

Thank you, Prof: @reddileep for another well detailed class.

1. Define the concept of Market Making in your own words.

Market Makers are market deciders, they helps traders to be sure that there is enough liquidity in the markets, there is enough volume of trading for trades to be done in a seamlessly way. If there are no market makers, there won't be little liquidity in the market. In other words; the investors who want to sell securities won't be able to do so due to a lack of buyers in the market.

Market makers help in making the market function, which means if you want to sell crypto, they are there to purchase it. In a similar way, if you want to buy a cryptocurrency, they are there to have that cryptocurrency available to sell if for you.

Market makers are very useful because they are always set to buy and sell so far an investor is set to pay their specified price. Essentially, they act as wholesalers by buying and selling an asset for the market to be satisfied, the prices they set are what reflect in the market demand and supply. whenever an asset demand is low, and the supply is high, then the price of the asset will be low. Similarity If an asset demand is high and the supply is low, then the price of the asset will be high. Market makers are committed to sell and purchase at the price and size they wish to.

2. Explain the psychology behind Market Maker. (Screenshot Required)

Market makers make a profit on both purchase and sell prices, they make transactions on both sides of the market. Market makers make quotes for the bid price and the asking prices. So, Investors who want to sell an asset would get the bid price, which would be a little lower than the real price. If an investor wanted to purchase an asset, they would be charged with a price, that is set a little higher than the normal market price. The money between the price that investors receive and the market prices are the gain for the market makers. Market makers still earn commissions by making liquidity to their customer' firms.

3. Explain the benefits of Market Maker Concept?

The Benefits of a market maker are particularly absorbing for those that have small accounts and private investors. The Market Maker offers:

1. A non-stop price position in the trading hours and therefore makes a quick entry or exit possible.

2. Fixed assets are guaranteed always. This means that there are no extensions that can be forwarded to the clients, even in erratic times.

3. The market maker acts as a mediator between the exchange and the trader. In an ideal way, he should be a neutral power that sets the positions against each other for the traders and investors.

4. Explain the disadvantages of Market Maker Concept?

Although everyone should know of the pros of a market maker, they are mainly interesting for traders the advanced traders to be precise. The disadvantages are:

1. An average has slight more expensive cost structure than when there is no market maker. Spreads can be significantly smaller, but unluckily, they are usually not possible for private clients to trade on the stock exchange directly.

2. A market maker that's is not regulated appropriately can always play tricks on clients and give them set back in cryptocurrency markets.

3. Market makers are acceptable for the price position and this can cause negative influence by false spread widening or bad price execution or bad positions of price.

5. Explain any two indicators that are used in the Market Maker Concept and explore them through charts. (Screenshot Required)

Moving average is a technical indicator that is useful for investors and analysts and it may be useful to determine the trend direction. It adds up the points of data of financial security over a specific period and shares the total by the data points number to reach an average. It is named “moving average" because it is non stop recalculated based on the latest price data.

The Traders Dynamic Index (TDI) is designed for assessing the state of the market and look for trade signals. TDI is an indicator that's complex as long as it is based on three other popular indicators: the Bollinger Bands, Moving Average, and RSI.

The RSI helps traders know if the current trade is "overheated". Moving Averages smoothes out the RSI lines. We can assess the Bollinger Bands through price oscillation amplitude and the trend direction. The TDI may be used as separately while trading.

Conclusion.

The market makers are market deciders, without market makers, trading may not exist due to the liquidity they provide. They make sure that a sell or buy order can be triggered at any moment, they offer a fair and transparent cost structure. Just that because they decide the market, market makers that are not properly regulated can play tricks on traders and cause them setbacks.

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