Market makers vs. Market takers

Now I understand that our market orders are good for MMs. So our brokers and MMs always welcome our market orders. LOL

https://www.cmegroup.com/education/courses/trading-and-analysis/market-makers-vs-market-takers.html

 

Brokers don't care. MM probably don't care, maybe get more info from limit orders

 

90% or so of my trades are limit although I don't consider myself a market maker at all.

 

I am trying to figure out if I am in the way of the MMs or brokers. They will/need to make profits so we better not get in the way as retail traders. Hehe

 

This is my opinion as a conspiracy theorist. (and how I trade every day)

Took me over two years to connect the dots,
then the dots started moving. because it's
not dots, but just one dot making all the moves.

The DOT is The Bankers AI driven algorithm
that induces retail to buy and sale, causing millions
of stop-loss orders to rest at certain price levels.
Which happily motivates Banks to go on stop-hunts,
leading to retail losses, and profits for the Banks.

Many times my mentor tried to
show me Mr Wyckoff's "Composite"
man is an AI driven algorithm.

To your trading success.

 

My understanding of “stop hunting” is that the market always seeks liquidity, i.e., where lots of resting orders are present. Even though I am not sure how it happens the reality is it happens more often than one thinks.

A market only exists when there are constant transactions or buy/sell trades in the financial markets. That’s why 90% stops get hit sooner or later. Very rarely a stop rests at the top/bottom and never gets triggered.

 

As Ross says the market job is to execute orders.

 

I don't think I have used a market order in about 15 years. Whenever I want in or out I am always trading a few ticks away from the market at least.
Nothing makes me happier than a partial fill. I know then I got a great price on that trade at that moment in time. It is not like my sizing and entry/exit is such an exact science that I need to get in/out 100% of the position instantaneously.

 

Basically, the market is merely an order matching engine where market orders cross with limit orders continuously. As such, it's completely neutral, impersonal and doesn't seek to do anything beyond what it's supposed to do: matching orders according to the rules that govern that market or exchange. A market facilitates trading. That's all. How prices move are entirely up to the players participating in that market as represtented by the orders they put in.

If more market orders are coming into a market than can be absorbed by available liquidity (limit orders) at a given level - the market will see an up tick or a down tick. Market orders represent urgency. If the next level is depleted for liquidity as it still can't absorb all the market orders being submitted, it will move to the next level. If that level offers sufficient liquidity, price stops, but if not, it will move to the next level after that and so on.

But theoretically, if the amount of limit orders available for any given level was unlimited, the market wouldn't move one single tick regardless of how many market orders that hit that market. Usually not the case, though, but still important to understand.

No.

You can have illiquid markets where there's still a bid/ask, but little or no trading going on.

Stop orders (market orders) get hit when the market trades at the price where it's submitted. That's all there is to it.

If a player experiences that he's getting stopped out constantly, it's that player whose at fault for not playing well enough. It's most certainly not the market that's out to get him.

 

Flashboys and Darkpools would be interesting literature for you.

Alternatively, searches on Kirilenko-Kyle will bring up insightful research on the subject.





Background on the Maker Taker Pricing Model is in the "CFA comments.." doc