Market makers are individuals or institutions who have the ability to influence the prices of financial assets through large buying and selling transactions. Their strategies are often based on a deep understanding of the psychology of other investors and exploiting their weaknesses for personal gain. To understand how market makers manipulate the markets, the psychological factors and strategies used must be considered:
1. Psychological manipulation:
- Emotional influence: Market makers use news and rumors to stir up feelings of fear or greed among investors. For example, they may spread a rumor about a particular company's poor performance to prompt investors to sell at low prices.
- False signals: They may create false buy or sell signals to lure investors into making certain decisions. This can involve placing large buy or sell orders and then canceling them before they are executed.
2. Manipulation strategies:
- Pump and Dump: Market makers pump asset prices significantly by buying large quantities, then sell the assets at a high price when other investors start buying.
- Dump and Pump: The opposite of the pump and dump strategy, market makers sell large amounts of assets to reduce the price, then buy them at low prices.
3. Collusion: Sometimes, market makers cooperate with each other to coordinate their movements, making it difficult for ordinary investors to predict market trends.
Tips for not obeying what market makers want:
1. Education and Awareness: Be aware of the manipulation tactics used by market makers and stay updated with the latest financial news and reports.
2. Research and Analysis: Rely on fundamental and technical analysis to make informed investment decisions. Don't just rely on news or rumours.
3. Diversify investments: Don't put all your money in one asset or one type of asset. Diversification reduces the risk of manipulation and increases the chances of achieving stable returns.
4. Determine entry and exit strategies: Determine in advance when you will enter and exit trades based on your investment objectives and not on real-time market movements.
5. Financial Advice: Consult independent financial experts before making major investment decisions. These experts can provide personalized advice based on your financial situation and goals.
6. Don't get carried away by emotions: Avoid making investment decisions based on emotions. Keep calm and control your fear and greed.
By following these tips and understanding the psychology of market makers, you can protect your investments from manipulation and make smarter financial decisions.
