What is liquidity? Liquidity is one of the core driving forces behind market prices; similarly, liquidity is equivalent to money.
The market is composed of buyers and sellers, and prices can only change through mutual transactions between buying and selling; otherwise, without transactions for a long time, it appears as a straight line on the chart.
The market is simultaneously a battlefield for both the house and the gamblers; the house is always the winner, while gamblers also distinguish between winners and losers. When you win money, one side loses money; when you lose money, one side wins money.
The house becomes richer by extracting value from gamblers; given enough time, the house accumulates more capital. These houses are often referred to as smart money. However, they cannot trade casually; their capital is enough to influence the market, so they employ certain techniques to operate. Therefore, their success actually depends on deceiving their opponents—the gamblers, known as dumb money.
How can we make ourselves win? As mentioned earlier, the house is always the winner, which theoretically means that if we follow the house, can we achieve a situation where they enjoy the meat and we drink the soup behind them? I would say yes.
Every action they take leaves subtle traces for us to analyze, interpret, and follow.
The house (smart money) I refer to is precisely the market makers. Market makers are powerful and wealthy participants who inject liquidity into the market; they try to disperse buy and sell orders in a way that minimally impacts the market, making your trades appear seamless. This is a clever disguise.
Being a market maker means they must always be on the opposite side of every trade; you can check the functions of market makers to understand this.
If most traders are making profits, then market makers will incur losses; if most traders are losing, then market makers will make profits.
Their goal is not to help you succeed in making profits, but to keep you entertained like in a casino while ultimately ensuring you do not make a profit.
They need you to feel frustration, fear, and emotional fluctuations. Why? Because emotions can cloud judgment, making you easily manipulated. In this market game, do not forget, they are the house, and we are the gamblers.
