Hello everyone, I am Paul Mi Yu, a small coder. This is our third day learning blockchain from scratch together (if you are interested in blockchain technology, you can follow me and learn together). Today, we will talk about what market maker trial trading is.
Market maker trial trading is an operational technique in the stock or cryptocurrency market, mainly referring to the main funds (or market makers) testing the reactions of retail investors or other investors and the distribution of market buying and selling forces through specific trading behaviors. It is a way to analyze market conditions and provides reference for market makers' subsequent large-scale operations.
One, the purpose of trial trading
Testing chip distribution:
Understand the number of floating chips in the market, namely the proportion of short-term traders (who are easily shaken out).
Master the average cost area of retail investors, which helps the market makers formulate the next step of raising or suppressing strategies.
Detecting market sentiment:
Observe the market's sensitivity to price changes.
Assess investors' willingness to buy or sell at different price ranges.
Testing selling pressure and absorption capacity:
Selling pressure: How many people are willing to sell (take profit) when the stock price rises.
Absorption: How many people are willing to buy (buy low) when the stock price falls.
Guide market expectations
Create some price fluctuations through trial trading to test retail investor psychology and guide market expectations for subsequent trends.
Two, common techniques of trial trading
Volume increasing trial trading:
Suddenly increasing trading volume to raise stock prices or cryptocurrency prices, observing if the market will chase up.
If the chasing force is strong, it indicates that market sentiment is high, and the subsequent rise may be easier.
Suppression trial trading:
Lowering prices in a short time to test the panic selling strength in the market.
If there are no large sell orders when the price falls, it indicates that the chips are well locked, creating conditions for subsequent rising.Sideways consolidation trial trading:
Maintaining stock prices or cryptocurrency prices in a narrow range for a long time, observing the patience of retail investors and the stability of chips.
If retail investors are selling off, it indicates that the floating chips are well cleared.
False breakthrough trial trading:
Creating the illusion of breaking through key resistance levels (upwards or downwards) to test investors' reactions.
If a breakthrough can attract a large influx of funds, it indicates that the resistance is relatively small.
Three, market performance during trial trading
Abnormal changes in trading volume:
Volume increases or decreases.
There are obvious volume-price fluctuations at key positions (such as support or resistance levels).
Sudden price fluctuations:
In the short term, stock prices or cryptocurrency prices experience drastic fluctuations, then quickly return to stability.
K-line characteristics:
Long upper shadows or long lower shadows appear.
K-line combinations show unclear performance, with ambiguous trends.
Four, possible actions after trial trading
Raising:
If trial trading finds that the chips are stable and the willingness to chase up is strong, the market maker may directly initiate a rising market.
Washing out:
If there are many floating chips (large market selling pressure), the market maker may choose to suppress the stock price to wash out weak chips.
Exit:
If excessive market selling pressure is found or willingness to chase up is insufficient, the market maker may choose to observe temporarily or gradually withdraw.
Five, retail investor response strategies
Stay calm:
The market fluctuates greatly during trial trading, and retail investors are prone to make wrong decisions due to emotional fluctuations.
Avoid chasing highs and killing lows during short-term abnormal fluctuations.
Observe the volume-price relationship:
If the volume continues to increase after a significant rise, it may be considered to follow.
If there is a volume increase with no price rise or a volume decrease, be cautious of the main force's reverse operation after testing.
Combine with technical analysis:
When distinguishing between true and false breakthroughs during trial trading, one can refer to technical indicators (such as moving averages, MACD) and key support/resistance levels.
The market maker's trial trading is a small-scale probing behavior carried out by the main force to grasp market dynamics and optimize trading strategies. Retail investors should avoid emotional trading when facing trial trading, pay more attention to market signals, and make rational judgments based on fundamentals and technical analysis.