Hello Everyone!

This is Sami Zuberi , hope you all are well. I am exceptionally hope set aside a few minutes for perusing my homework post for @reddileep and valued it. Here i am going to impart my views on "Market Maker Concepts". So how about we begin

Made this above poster on Canva

Question 1.

Define the concept of Market Making in your own words.

Concepts of Market Making :

Market makers are specialists (or entities in certain circumstances) who are recognized for channeling funds and determining the cost of an item. This is one of the crypto strategies for generating funds through the provision of trading volume. The market building idea may be defined as a condition wherein the traders conduct transactions of assets through their own wishes cost pricing at which they desire to exchange inside the marketplace at around that particular moment. A market maker is a person that utilizes sociology as well as a large amount of money to gain profit from the purchases made in the market. Even though he has a unique cost than for the vendor, the market maker somehow doesn't immediately implement their contract. Market making refers to the process of industry participants fixing or specifying the valuation of a cryptocurrencies asset at quite a value significantly departs as from market level.

The notion of market making giving instructions to provide volatility to an item. Market Makers are speculators whom put a buying and selling order based on a potential value rather than the current valuation. Market-making facilitates the acquisition and asset sales, leading to greater obtainability across markets. A group of traders sets its own pricing for buying and selling their respective commodity. The product and service process governs the financial system, as it does almost every industry. That whenever a market maker receives a procurement plan, they immediately raise capital through their own holdings to release the funds.

Question 2.

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

A group of people known as market markers sets pricing that they are comfortable with. Market makers can place two sorts of orders: buy/sell and limit orders. They could decide to place a cheap purchase order and then a sell order at a higher price than the bargain buy order. Because market makers, also known as liquidity providers, frequently set up both buy and sell signals in situations like these. They will place a purchase order at a bargain and then place a sell order at a much higher price than the buy order so that they may profit. It's important to emphasize that these market makers aren't only in it for the greater good providing liquidity to traders. They're in it to make money. The gap between the Bid and Ask prices, known as the Bid-ask Spread, is the profit made by market makers.

The market maker mindset is best described as a third-party trading idea in which liquidity is given in exchange for a revenue known as the bid-ask spread.The market maker's mindset stems from the fact that they are in power since they manage the trades; they earn a lot from their own interests, and the manipulation due to their excess funds might be a deception to purchase everything and raise the market price.

• Here i have given an the example below of bid-ask spread the psychology behind market making;

Question 3.

Explain the benefits of Market Maker Concept?

Benefits of Market Maker Concept :

Benefits of Market Maker Concepts are as follows :

• Transfers may be completed relatively immediately, which is beneficial to all parties participating with in marketplace. Through increasing the value of the tokens, the notion of a market maker could entice additional investors towards the marketplace.

• The notion of market makers offers another an advantage throughout the marketplace since large value changes can catch tiny investors as in middle, causing a great deal of money to really be wasted. The market makers aid there in smooth operation of transactions.

• By upping the cost of the coins, the conception of such a market maker may entice more participants towards the system. Accessibility is provided to a commodity, that the additional the fluidity, the speedier and far more probable it would be to be sold there in marketplace.

• Since this enhances customer confidence, market makers' concern in evaluating a certain assets makes the commodity valuable to invest in. Market makers get the tendency to hold the marketplace steady by reducing spill rates.

• The market maker assists as in reduction of such an asset's unpredictability. The market maker idea might assist investors in making lucrative transactions by allowing them to take smart incoming and outgoing strategies.

Question 4.

Explain the disadvantages of Market Maker Concept?

Disadvantages Of Market Maker Concept :

• In such an internal marketplace, market makers may not often consistent. Market makers have the ability to depreciate the cost of a particular asset. New investors can be taken advantage of by market makers, particular when their concepts are not as well.

• When an investment seems to have a weak liquidity position or price fluctuations activities, it may potentially be directly attributed to market maker inefficiency. Market makers would avail more use their understanding as well as take benefit on your deficits.

• Market makers generate revenue via trading alongside market participants as well as new traders. A few of disadvantages of something like is that market makers will select to shift the marketplace after trapped the small investors.

• Scalping is not possible using the market maker model. This is because the difference seen between bid and ask costs is usually too small for everyday traders could make more profit.

Question 5.

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

Two signals that are employed in the market maker idea will be discussed. The relative strength index (RSI) and moving averages are the two indicators I'll examine in this question.

Moving Averages:

• The most often used indicators are moving averages, which are also known as trend-based indicators. Two moving average lines make up this indicator. One MA line is higher than the other, whereas other is lower or less than the first. It is a bullish moment when the lower line crosses the higher line facing up, and it is a bearish time when the higher line crosses the lower line looking downwards.

As you can see in the above screenshot, the moving average of 9 has crossed over the higher moving average of 21, which is pointing upwards, indicating a bullish moment or purchasing signal. On the other hand, the fact that the higher MA crosses the lower MA 9, which is moving downwards, indicates that the market is in a negative phase.

Relative strength index:

• The Relative Strength Index (RSI) is a tool for calculating price movement. The RSI is a measurement that varies from zero to one hundred. When the RSI hits 70, it is considered overbought, and when it goes below 30, it is deemed oversold. False signals can be generated by turbulence and failure swings.

UTK is the cryptocurrency I've selected. As you can see, when the rsi falls below 30 lengths, it indicates a buying signal because the region is oversold, and when the rsi rises over 70, it indicates a sell signal because the area is overbought. It demonstrates how market makers deceive us.

Conclusion :

I conclude that professor gave us a very informative lecture that helps me to learn more about market making concepts. The idea of market makers instructing an item to have more volatility. A market maker is a person who makes money by using sociology and a huge sum of money to benefit from market purchases. There are also some merits and demerits which i explained above in the homework post. Examining the behavior of market makers on a certain commodity allows being to properly forecast as well as forecast patterns, as well as spot false indications. Market makers are quite good for aiding traders in completing deals in a timely and accurate manner. For actively engaged in trading, investors need grasp that Market Maker idea.

Special mentions to;

@reddileep