Blockchain and Cryptocurrency Advanced - Two Indicators that Are Used in The Market Maker Concept

The RSI indicator

The RSI indicator is a very powerful technical indicator that indicates overbought and oversold in the market. The RSI indicator has an oscillator line that moves between the values of 0 and 100. The main values of the RSI indicator are 30 and 70. When the RSI line moves above 70, it is an indication that the market is in overbought. When the RSI line moves below 30 value, it is an indication that the market is in oversold. When the RSI line ranges around 50, it is an indication that there is no strong trend direction in the market and that the market is in a state of indecision.

The RSI is a very common indicator that is used by a lot of investors and trader. This is why the RSI indicator is one of the indicators that is used in the market maker concept. Market makers know that a lot of investors and traders make use of the RSI as their trading strategy for buy and sell signals, so they capitalize on this by manipulating the market and causing an increase in the buy volume in the market. This causes an increase in price. This upward price movement will reflect on the RSI as a bullish signal. A lot of inexperienced investors and traders might fall for this and place buy trades in anticipation of a continuous upward price movement. Also, traders who placed a sell trade might get their stoploss level triggered. As a result of this, the market makers makes profits.

Moving Averages indicator

The moving average indicator is without a doubt one of the most popular technical indicators that is used by a lot of investors and traders for signals in the market. What the moving average does is that is smoothens out the price fluctuations on the chart, to make it easier to filter out noise in the market. As a very common and popular indicator, a lot of traders make use of the moving average indicator for signals.

The combination of 2 moving average indicators with different period lengths mostly high period length and small period length are used by traders for identification of signals in the market. For instance, the combination of the 50 and 200 period moving average can be used for buy and sell signals. When the smaller period MA line comes from below and crosses above the higher period moving average line, it can be a buy signal for a potential upward price movement. When the smaller period MA comes from above and crosses below the higher period MA, it can be a sell signal for a potential downward price movement.

Because of the popularity of the moving average indicator in the world of trading, Market makers can capitalize on this to their advantage. especially against the short term traders and short timeframe traders. They can strategically initiate buy orders to cause a rise in the buy volume. This can cause the moving average indicator to show signals that are false. A lot of inexperienced traders and investors can make use of this false signals to perform trading activities that would lead to loss and in turn bring profits to the market makers. From the chart, we can see that the golden cross was formed but the price reversed downwards and continued to fall. short timeframe traders can make use of this signal as an early signal for an uptrend movement, but it didn't happen as the price quickly reversed downwards and continued to fall. This leads to loses and at the same time, profits for the market makers.

When it comes to trading, market makers is a very important concept. Market making is basically the activity of buyers and sellers in the market in which buyers and sellers provide liquidity in the market. Trading can only occur where there are buyers and sellers in the market. Market makers are basically the ones responsible for creating liquidity in the market to facilitate trading activities. However, even though market makers are important in the market, there are downsides to it. Because maker makers usually the large investors and traders, it becomes possible for manipulation to happen in the market. Nonetheless, the market maker concept is important in trading. Because of the downsides of the market maker concept, it is importsnt for traders to make use of multiple trading strategies to help reduce risk and also make the bet trading decisions.