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I am delighted to participate in your class this week 6 of cryptoacademy season 4 professor @reddileep.
# <center>My Entry</center>
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># 1- Define the concept of Market Making in your own words.
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Market making is a process carried out by market makers.
Market makers provide the opportunity of trading to traders, and investing to investors.
They are individuals who are in control of of exchanges in the price of assets or security.
And the idea behind market making is to provide the market with high volume of activity thereby profiting from the difference in the bid ask spread, they also help in price volatility.
An example is a market maker is willing to buy crypto B at the price of $4 usd. This is the bid price. There by a market maker can also sell crypto B at the rate of $4.04, this is the ask price. If a trader is selling, he sells at $4 but if he wishes to buy, he buys at $4.04. $0.4 difference is the profit of the market maker.
Market makers set quotes of bid ask which us the buy and sell for investors.
There are three types of market makers
* Retail market makers.
* Institutional market makers.
* Wholesale market markers.
And they all make little profit that turns big when added up.
># Explain the psychology behind Market Maker. (Screenshot Required)
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The main aim of market makers is to make profit from bid ask spread, but before making profit they have to keep the traders active and also keep the market functioning.
They also control how assets moves and check the prices to make adjustments where needed.
Also if there is no market makers there will be no investors and traders.
They provide liquidity of assets making it easier for transactions.
[source](https://m.investing.com/)
The market makers make profit from the difference between buy and sell price, and this is there aim of market making.
># Explain the benefits of Market Maker Concept?
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* Market maker concept makes trading easy for investors and traders,without market maker there will be lesser investment activities.
* Market makers serves as intermediary between sellers and buyers of assets.
* They help to fix opening price before any trading season.
* Because market makers provide liquidity the traders benefit much from it.
* market makers concept includes reducing slippage thereby providing more orderly exit and entry points for traders, market makers control price swing and provide upto date informations.
># Explain the disadvantages of Market Maker Concept?
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* There is tendency of tricking the traders because they don't have every information especially when the market is not regulated.
* Small investors can lose their money because market makers are in charge of price action positions so they can manipulate prices of assets in the market.
* Market makers can bring the value of a coin to a very low level, by providing a large sell order and small traders are afraid and respond quickly, then they buy the coin again at a very lower price.
># Explain any two indicators that are used in the Market Maker Concept and explore them through charts. (Screenshot Required)
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There are so many indicators but am going to explain and explore
# Bollinger band.
# Relative Strength index.
### Bollinger band
This is a trending indicator used to dictate overbought and over sold area in the chart.
When using this indicator it will help us know when the prices of assets is overbought and oversold.
Bollinger band consist of three bands
* Middle band.
* Lower band.
* Upper band.
When we are strictly follow this indicators we will know when market markers are pushing prices lower or higher.
[source](
https://www.tradingview.com/)
https://cdn.steemitimages.com/DQmRfUjJZVW3Z1iqp4qZeTs8x75HChpYDrYge1xX2XFRGEr/image.png
### Relative strength index.
This is a momentum and indicator that indicates changes in prices of assets to evaluate overbought and oversold.
This indicator ranges from 0-100, and once its above 70 it is overbought once is lower than 30 it is oversold, and it is calculated with 14days period data.
When we follow this indicator we will know when the market makers and bidding the price of assets up or down.
(https://cdn.steemitimages.com/DQmVWGp7pszndEiUQp3QJUtTCppZwM4rudT9Kdqum12cTuV/iMarkup_20211016_231641.jpg [source](https://www.tradingview.com/)
From this image we can see after crossing the overbought area that there was a long downtrend movement on market price.
More to that good indicators helps traders to work hand in hand with market makers knowing trend directions and dictating reversals this will help traders be successful and benefits from market making concept.
Thank you </div>