Liquidity Takers = Gamblers?

Discussion in 'Trading' started by shortie, Sep 27, 2008.

Liquidity Takers = Gamblers?

  1. Liquidity Takers = Gamblers

    0 vote(s)
  2. Liquidity Providers = Gamblers

    1 vote(s)
  3. Both are Gamblers

    5 vote(s)
  4. Neither is a Gambler

    5 vote(s)
  5. I like chocolate cookies

    15 vote(s)
  1. Is it this simple: liquidity takers are gamblers playing against odds, liquidity providers have odds in their favor? I reason that the market does not give a rat's asss who makes money, but the market always needs liquidity and pays premium to those willing to provide it. So, liquidity providers are on the same side as the market. This leaves liquidity takers to play with odds stuck up against them.

    Please feel free to pound me :D
  2. Lucrum


    Do I get a cookie for voting?
  3. Please define:

    (a) Liquidity taker

    (b) Liquidity provider
  4. let's say you would like to sell 100 shares of MSFT. you see a bid on island for 27.20 and you are happy with the price, so you hit it with your sell order. You just took some liquidity from the market because now there are less bids hanging in there. On the other hand, if you were not happy with the price you might have put a limit order to sell your shares @27.50. In this case you added the liquidity because you added an ask to the market.

    So, adding a bid/ask that is not immediately hit is adding liquidity. hitting a bid/ask that is already in the market is taking the liquidity.
  5. ElCubano


    a) My Wife

    b) Me
  6. this is nonsense. i take liquidity away all the time.

    you trade where the action is at, bid or offer dosent matter

  7. :D
  8. Specialists hit bid/ask all the time to provide liquidity, so what you say is in conflict with that notion.
  9. maybe they do it as part of their routine. but i don't see how they provide liquidity by hitting bid/ask. in my understanding liquidity equals bid/ask offers on the book. if somebody removes those offers, they remove liquidity.
  10. you dumbass have no idea.
    #10     Sep 27, 2008