Market Maker Theory

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At its core, the Market Makers business model is simple: filling orders inside the world’s largest auction house, the market. Whether you’re buying or selling, your money is always welcomed by the system.​
 

Market Makers play on one of our greatest vulnerabilities: human psychology. Patterns repeat, and emotions get exploited, especially around the power of three. We see it everywhere in life: third time’s the charm, good things come in threes, try, try again. The market maker leverages this deeply ingrained belief system, moving price in four stages:

• Setup – the bait is placed.

• FOMO – traders rush in, driven by fear of missing out.

• Trap – positions get caught on the wrong side.

• Profit – the market maker collects.
   

The first image illustrates a model of how the Market Maker moves prices. Once you recognise this structure, you’ll start seeing it appear on charts everywhere. This is why market maker’s are so profitable, they exploit predictable human behavior.
 

Market Makers aren't all-seeing algorithms or evil corporations pulling strings behind the scenes. Instead, think of them as the casino, and you, the trader, are the player. You choose whether to step into their game. Once inside, every trade you place helps fill the Market Maker’s and his partners’ limit orders.

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The MM Cycle unfolds in three distinct phases:

1. The Setup (W Zone): The groundwork is laid for the direction of the next move.

2. The FOMO Zone: Price action tempts traders to jump in, chasing momentum and opening positions.

3. The Trap Zone: This is the destination where banks, hedge funds, and institutions have their large orders waiting. Retail traders are seduced into buying or selling directly into these orders, providing the liquidity big players need
    

Once the trap is sprung and enough retail orders have been absorbed, the market flips direction. This is when the “smart money” gets paid and why so many traders are left on the wrong side of the move.

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Have you ever considered who you’re really trading with when you open a position? Or why your balance moves up or down instantly?

When you sell your position, you’re not being matched with some random trader across the globe. If that were the case, markets wouldn’t run with the speed and efficiency we see today. There has to be a “house” or a “dealer” behind the system and that’s the Market Maker.

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Think of it this way:

• The Market Maker is the company like Audi, BMW, or Toyota.

• The broker or exchange is the salesman pushing you to buy, sell, or sign contracts.

Without the Market Maker, markets wouldn’t flow seamlessly. For example, how could you instantly convert GBP into EUR, and then flip those into CAD (EUR/CAD), all at the click of a button? That’s only possible because the Market Maker has pre-loaded orders ready to fill yours.

Here’s the catch: when you go LONG, the Market Maker goes SHORT. Every transaction requires balance, you can’t buy without a seller, and you can’t sell without a buyer. Your true point of contact, every single time, is the Market Maker.

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All of this is explained so you can see through market manipulation. Your goal isn’t to beat the Market Maker or take his money, you simply need to trade in line with them.

The Market Maker Cycle plays out on the chart in a simple rhythm:

• 3 Zones up from the W bottom

• 3 Zones down from the M top

That’s the philosophy in a nutshell. Price gets jammed at one zone, shifted twice to lure traders in, and then flipped the opposite way to liquidate them.

Here’s the brutal truth: most retail traders buy at the M top or the L3 zone. They either lose everything chasing the move… or panic-sell near the bottom of the second L3/W as fear takes over. That’s why the Market Maker wins and why understanding this cycle is key to surviving.