The Market Maker Manipulation

There are market makers in the stock market as well as the FX market, and both help to provide liquidity. So how do these different types of market maker compare? Well, a key way in which the FX market differs from the stock market is that Forex transactions are less transparent.

This book serves to explain how the markets are manipulated by market makers in order to beat the retail traders. You see, in Forex there is no trading floor, no accurate measure of open volume, and simply no way to tell how the institutional traders are positioned…or so I thought! The Cycle First of all, let me ask you, "Have you ever heard of a market maker?

Market Wizards

FX SpotTradingand Risk ManagementfromA MarketMaker’sPerspective by Mu Yang A thesis presented to the University of Waterloo especially to bankers and market makers. (Forex or FX) market is a twenty-four hour, decentralized over-the-counter (OTC) financial market for currency trading.

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Popular Latest Comments Tags. Routines and discipline make all the I just had to find out a way to keep it. Like many of you, I buried myself in technical books, classes, and anything that hinted at making me a better trader. I was provided an extraordinarily unique opportunity to study under a market maker. So, in preparing to beat the man, I had to first learn from the man.

What exactly does this mean for you? The Cycle First of all, let me ask you, "Have you ever heard of a market maker? Well, I'm here to tell you otherwise. There is a small elite group of traders that do in fact control how the market will play out on any given day. The beauty of what I am about to share with you boils down to this: These manipulations are visible on the chart to the trained eye.

Once you see the behaviors and understand what they mean, you will be able to trade like a market maker! The price comes in, and the market makers make a quick push up, pips. They make a quick pull back down, and then go sideways. They push it again pips. Why would they do this?

When they push up, you're a buyer, and they sell to you. When they push down, you're a seller, and they'll buy from you. They are accumulating contracts, and building up the volume. Have you ever heard of 1 hour, 4 hour, daily, trade in the direction of the trend? Why doesn't trend following work? It's not about the trend, it's about the money. All the market makers do is wait for the money to build up during the accumulation phase, and see where the contracts are accumulated.

Let's say they have 3 trillion dollar in long-holders, and 1 trillion dollars in short-sellers. Guess who's getting punished today? It has nothing to do with the 1 hour, 4 hour, which way it's pointed, or which way t's going. It's where the dollar volume is built up that they can do the most damage, and collect the contracts. They'll quickly change the high of the day, settle in, and work it for minutes. This is a two-pronged approach. The reason they use the number three is because we are stubborn.

They hit it one time, and we think, "Oh, maybe it's not really going that way. It'll come right back. They hit it a second time, and we think "Oh, I'm missing it! Now, you've changed in the wrong direction, which is their first break-out of the Asian channel, to get you to recommit your money the other way.

What happens when they break out of the range is they trigger the stops of the weak short-sellers, the people that put their stops on the other side of the Asian range, people who put their stops 7 pips below the candle. They cancel out this volume, and get those traders to recommit their funds long. So, let's say half of the people come back in, and the 3 trillion dollars has now become 3. What is the goal for the market makers, now? To get that money! How do they do it? When they make this pass, people put pending orders right above the high.

The job of the market makers is to go to the high, open the spread, trigger the pending orders, and validate all of the patterns that can be found in textbooks. When they fire those pending orders, all of those pattern traders are now stuck. They quickly pull off of the high of the day pips, to trap the traders in that cycle, and hold them there. Stop Hunt Phase Have you ever taken a trade, and been so excited that you started counting your money, and projecting that it's going to go to sky, and you take a break, go have a cup of coffee, and when you come back you're down big?

You ask yourself, "What the hell just happened? Market makers went to the high, opened the spread, triggered all of the break- out traders, triggered the ABCD pattern, triggered the Fibonacci traders, and pulled them in. Now they've got them stuck! They go into consolidation pips off of the high, trade sideways for a few minutes, and what do you start doing? You start begging and pleading.

I've learned my lesson this time, I won't do it again. Hope is not a strategy! We're not in the "hope" business! Then, what happens after they consolidate 60 minutes or so, they will start the trend run against their original move. Once they set the high of the day off of the break, they'll start the channel, and run the trend down for hours.

If you're going the wrong way, it's a nightmare! It's slow, relentless, and it just keeps going, and going, and going. You think it's going to hold, and you start making up stuff in your head, and seeing things in the charts that aren't there. You start making up reasons to validate why you were wrong instead of understanding the true market structure.

After the trend runs hours it will go into the low of the day, and the same behavior is seen. They'll make an M at the high, a W at the low. People trade the break of the low from yesterday, and even from 2 or 3 days ago. They will get to those lows, act aggressively again, open the spread, absorb the pendings, validate the patterns that everybody trades, and snatch it away from them.

They'll pull it off of the low; go back into consolidation to end the day pips off of the low.