But unlike market makers, the trader can always exit a position by winning or losing, which MM is not in a position to do. Construction of trading strategy based on the preferences of liquidity providers Modern financial markets cannot be imagined without market makers, companies that create liquidity. If it were not for them, in conditions of slow trading there would be ideal conditions for manipulation, when the reasons why prices explode, grow significantly, then fall or vice versa are not known. However, even the presence of market makers does not save Forex from the risks of flash crashes, which in the last five years have confronted the Japanese yen, Swiss franc and other currencies. Such events are extremely rare, and for this it is necessary to thank the liquidity providing companies.
The market maker's income is formed from the difference between the purchase and sale price of the asset, so for them a long period of consolidation at low volumes is a source of headache. On the contrary, liquidity providers will gladly rub their hands if quotes Peru Mobile Number List rewrite recent extremes, in which they are prone to place stop orders or pending orders. TPSL1 and TPSL2 levels, where a large number of orders are likely to be placed: LiteFinance: We make profits based on the strategies of market makers How can this information be used by a common trader? First of all, pay attention to a long period of slow market activity, which appears in the formation of a narrow trading range and low trading volumes.
Secondly, look at the behavior of volumes at the exit of this trading range, as well as near the extremes TPSL1 and TPSL2. and a wide spread, which will suggest the most likely direction of price movement in the short term. Exit of GBP/USD quotes from the trading range: LiteFinance: We make profits based on the strategies of market makers In the example of GBP/USD throughout the American and Asian Forex sessions there was low trading activity, clearly not in tune with the market maker. By pushing the market towards sales, the liquidity provider managed to significantly increase the interest of participants in making transactions. At the same time, knowing with a high probability the direction of the movement of quotes, it was possible to sell the pound on the rise.