do market makers just take price in the direction they want?

Discussion in 'Order Execution' started by 1a2b3cppp, Jan 28, 2018.

  1. nickynoes

    nickynoes

    #21     Feb 7, 2018
  2. tylerbose

    tylerbose

    The thing is there are multiple market makers that don't necessarly agree with each other.
    the DOM will give you no valuable info
     
    #22     Feb 7, 2018
  3. Sig

    Sig

    At a basic level, they're always there with a quote to buy from potential sellers and sell to potential buyers. To compensate them for this, they buy at a slightly lower price then they sell. Ideally if you're a market maker the market never moves suddenly and you just slightly adjust your bid and ask prices if you get imbalanced on one side or the other. Obviously it doesn't always work this way and the market moves for and against you, but ideally the majority of your profits came from the buying at a slightly lower price than you're selling all day long.

    For a good idea of what the world looks like without market makers, take a look at single stock futures. You have no idea where the current market is, most symbols have no orders so you would have to place an order yourself and constantly adjust it as the underlying moves until someone ambles along who wants to take the other side of your trade. The result, near zero volume and a failed market.
     
    #23     Feb 7, 2018