Market Makers

Discussion in 'Trading' started by n00b7r4d3r, Sep 2, 2007.

  1. I am looking for resources to learn about how market makers work inside out as I believe this is an important part of trading. So far my research has found nothing more than:

    "Market makers provide liqidity and make money on the bid/ask spread"

    To me this seems like a neglected area of information since after all market makers are the people who actually decide where price goes (in the short term) and it seems to me that having an idea where price could go might be kinda important.

    From what I understand generally market makers place the spread where it is to their advantage so retail selling to bid = bullish and retail buying on ask = bearish... do I know what im talking about?

    Ive read about tricks that are used like posting fake bids or offers but im more interested in when and why they move the spread and reading the market to understand what they are thinking.
  2. They are thinking the same thing you are: how to make money.
    They do have more inventory to work with, but when they trade for themselves they are not that ahead of you. Nothing to worry about.