Have you ever stared at a crypto chart and wondered why prices spike or crash without any clear reason? Why does Bitcoin dump just after good news? Why do liquidation cascades always seem to hit retail traders first?
It’s not magic. It’s market making. And behind those candles are powerful players pulling the strings: Market Makers.
In this article, we’ll decode who they are, how they manipulate price movements, and why most retail traders lose, not because they’re wrong, but because they’re playing the wrong game.
Who Are Market Makers, Really?
Market makers are institutions whose purpose is to provide liquidity and ease of trading assets. They achieve this aim by quoting the price of the buyer and seller and taking both positions. They achieve profits by the price difference between the bid and ask price.
Market makers are the ones that keep the chart moving and are the real painters of the green or red candlestick we see in different time frames. They trade in large volume, and this is where the game gets murkier for stocks or crypto since they have the ability to influence the price movement.
While market making is essential to ensure trades go through smoothly, crypto market makers, often algorithmic firms or bots, sometimes go beyond just providing liquidity. They engineer volatility, trigger stop losses, and hunt for liquidations in perpetual futures to profit from price swings.
How Do Market Makers Manipulate? Let’s break down the tactics:
1. Stop-Loss Hunting
Market makers know where most retail traders place their stop losses. By temporarily driving the price below support levels (or stop orders), they trigger stop losses and then quickly reverse the price—pocketing the profits.
Loss for retail investors = Profit for Exchanges or Market makers!
2. Liquidity Sweeps
To fill large orders, market makers may artificially move the price up or down to attract enough liquidity. This causes sharp wicks in candles that seem random — but are planned.
3. Spoofing & Fake Orders
Placing large orders and cancelling when the price moves towards execution levels, influencing market sentiment, is known as spoofing. This creates false demand or panic, tricking retail traders into poor entries.
4. Front-Running
Market makers can sometimes see order flow data from exchanges and use this information to trade before retail orders are processed , giving them a massive edge.
This generally comes under insider trading and is an unfair practice for any market maker, as this provides an edge for them to trade with confirmed profit.
Why Retail Traders Lose 80% of the Time
The sad truth? Most retail traders:
- Don’t understand order books
- React emotionally to price swings
- Use leverage without managing risk
In the game of trading, whether it be spot or derivatives, one has to lose. Sometimes it’s the market maker or retail investors like us. Unfortunately, the one who has a bigger ship of capital wins the race owing to the price influence of the asset. Market makers are one of those algorithmic whales that have the ability and role to roll the markets intentionally.
Does it mean that Market Makers or Instutitional Whales are Bad?
Market makers play an essential role by providing liquidity and ensuring smooth trade execution for buyers and sellers. Without them, markets would be inefficient and illiquid.
However, problems arise when these players use their advantages, like access to order flow data and large capital, to manipulate prices for profit. This can lead to stop-loss hunting, fake breakouts, and liquidation traps that hurt retail traders.
So while market makers aren’t inherently malicious, their actions aren’t always neutral, and understanding their influence is key to surviving the market.
So, Can You Beat the Market Maker?
Not easily. But you can survive and learn to adapt:
- Understand liquidity zones: Don’t place stops exactly where everyone else does.
- Watch open interest & funding rates: They reveal positioning bias.
- Avoid overleveraging: Even if you’re right, volatility can shake you out.
- Use timeframes wisely: Market makers prey on lower timeframes where noise is highest.
- Focus on narrative + sentiment analysis: Sometimes price leads news; sometimes it fakes it.
Bottom Line:
The trading world isn’t a level playing field. Larger players, with more capital, data, and influence, often have the upper hand in moving prices to their advantage.
Retail traders can be right in their analysis and still lose, simply because markets are driven by more than logic; they’re shaped by whales, market makers, and shifting news-driven sentiment.
Success in trading isn’t about winning every trade. It’s about surviving the volatility, adapting to market behavior, and learning to navigate a sea where the big fish are always hunting.
Treat trading like a marathon, not a sprint, and always protect your capital.
Prajwal Barate – Medium
Are You Really Trading the Market? Or Being Played by It? was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.