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market maker definition: a dealer in securities or other assets who undertakes to buy or sell at specified prices at all times. - A market maker is a individual market participant or member firm of an exchange that also buys and sells securities for its own account, at prices it displays in its exchange's trading system, with the primary goal of profiting on the bid-ask spread, which is the amount by which the ask price exceeds the bid price a market asset. - The most common type of market maker is a brokerage house that provides purchase and sale solutions for investors in an effort to keep financial markets liquid.
When the price fluctuates how does the market maker not get screwed? Someone hit their offer at $20.30 so they end up selling 1000 shares, then the spread fluctuates up to $20.80/$20.95. So they just sold lower and are going to sell higher? Is there any sort of hedging they do on the inventory so that it doesn't end up depleted or heavy underwater in a volatile market?
Market Maker trades against all market participants! Market is not an auction as we are told by pundits. MM's don't get commissions regardless of the sale price. On the contrary MM owns shares which it sells to buyers. To exist market maker must buy low and sell high. What makes it a scam is the fact that MM sets bid/ask prices. They will not drop the price until they get rid of the stock they have on hands. Consequently as soon as they buy they immediately raise the bid price to dispose of the shares on MM's hands, at a profit. Thus all these price falls and bounces every 5 seconds. Selling at a profit is the only reason MM is in MM's business. All big investment banks are also MMs. The analysts who publish their recommendations work for the very same banks that the MMs do. The scam is legal and the only way to protect yourself here is selling options.
I still don't get it. WHO are the market makers and how is it a free market if there are large institutions controlling supply and demand inventory -- via algorithms -- and hence hence controlling prices?
MM trade shares in "dark pools" aka transactions between broker dealers and their BEST MM clients that is not available to the whole market ie Level 2. There is no way to determine if they are selling to cover a long position, selling to fade a bull run, then cover buy buying, etc. We know that the MM are on both sides of the trade, we just don't know if they are actually long or short or a combo of both in relation to their risk/reward scenario.
guys a simplified way of knowing what a market maker is this: imagine you have candy and you want to sell it so you sell it for $1.00 and as soon as you say your selling it someone goes to you straight away and is like "i want to buy it off you however because i dont really need it, im just buying it so you can sell it i want to buy it for $0.80" and the guy who bought it does the same thing to everyone who want to buy and sell candy
There are regulators who ensure MM always offer at the "best price" for clients. If you think about it as well, they can't remove others orders from the LOB, so if they were quoting bids at lower prices and asks at higher, they would 1. be breaking the rules on the spread they're allowed to offer; and 2. no one would trade with them as there would be better bid/ask prices that people would trade at
Sorry, didn’t inform me one bit. Spreads, Bids, SETS etc, jargon-filled rambling left me non-the-wiser. In truth, I came here to understand what exactly an MM can do as I hear so much about tree shakes and MMs calling holders to try and get stock and lastly placing late trades and/or buys as sells etc. All of this still is a black box to me.
The hint is the name. A market maker makes a market - they provide a price which you can deal on. Without market makers, it would take considerably longer for buyers and sellers to be matched with one another, reducing liquidity and potentially increasing trading costs as entering or exiting positions would be more difficult. Also, check this video out: th-cam.com/video/I4C-5AstEfA/w-d-xo.html
👉 Trade with our Sponsor Broker: Trade Nation www.financial-spread-betting.com/ccount/click.php?id=95 Trade sensibly! 81.7% of retail investors lose money.
👉 We are seeking more contributors who can produce great video educational content about trading for our channel. If you think you have what it takes please get in touch by sending a message to traderATfinancial-spread-betting.com (remove the AT and substitute by @).
👉 It seems a lot of our viewers are non-subscribers. Make sure to subscribe to our youtube channel as we upload regular videos! If you hit the “Bell” icon (🔔) you will receive a notification on youtube every time that we upload a video on our channel. Bell icon hitters are super fans of our channel 🥰
Explained in a very complicated way.
I guess I am basically a market marker in my favorite company. I buy when it dips and sell when it goes up, helping reduce volatility.
SO, WHAT IS A MARKET MAKER?????? HOW COME NOBODY ON THE INTERNET CAN GIVE A SIMPLE DEFINITION
market maker definition: a dealer in securities or other assets who undertakes to buy or sell at specified prices at all times.
- A market maker is a individual market participant or member firm of an exchange that also buys and sells securities for its own account, at prices it displays in its exchange's trading system, with the primary goal of profiting on the bid-ask spread, which is the amount by which the ask price exceeds the bid price a market asset.
- The most common type of market maker is a brokerage house that provides purchase and sale solutions for investors in an effort to keep financial markets liquid.
Can't wait until I think 1000 shares isn't a lot.
would be helpful to know situations with inventory and how they set prices after a few transactions
When the price fluctuates how does the market maker not get screwed? Someone hit their offer at $20.30 so they end up selling 1000 shares, then the spread fluctuates up to $20.80/$20.95. So they just sold lower and are going to sell higher? Is there any sort of hedging they do on the inventory so that it doesn't end up depleted or heavy underwater in a volatile market?
Market Maker trades against all market participants! Market is not an auction as we are told by pundits. MM's don't get commissions regardless of the sale price. On the contrary MM owns shares which it sells to buyers. To exist market maker must buy low and sell high. What makes it a scam is the fact that MM sets bid/ask prices. They will not drop the price until they get rid of the stock they have on hands. Consequently as soon as they buy they immediately raise the bid price to dispose of the shares on MM's hands, at a profit. Thus all these price falls and bounces every 5 seconds. Selling at a profit is the only reason MM is in MM's business. All big investment banks are also MMs. The analysts who publish their recommendations work for the very same banks that the MMs do. The scam is legal and the only way to protect yourself here is selling options.
So a market maker is the bookie. Collecting on the juice but as well setting the spread!!
thats a well pressed shirt
The liquidity is YOU - Mr Retail Trader!
He is keen to point out that he uses dollars in the example, but is more familiar with the pound: is that relevant?
I still don't get it. WHO are the market makers and how is it a free market if there are large institutions controlling supply and demand inventory -- via algorithms -- and hence hence controlling prices?
It’s easier to understand when u know what he talking abt..hes talking abt bid n ask of market makers n how they manage trades by providing liquidity
Hi so are market makers individuals or companies/institutions?
Where does this MM come when the buy or sell is happening online ?
MM trade shares in "dark pools" aka transactions between broker dealers and their BEST MM clients that is not available to the whole market ie Level 2. There is no way to determine if they are selling to cover a long position, selling to fade a bull run, then cover buy buying, etc. We know that the MM are on both sides of the trade, we just don't know if they are actually long or short or a combo of both in relation to their risk/reward scenario.
Do options always have a larger spread than long positions?
Are you trading against them in any way?
Anything we need to watch out for?
I know this post is a little old.
How do you become a specialized market maker?
guys a simplified way of knowing what a market maker is this:
imagine you have candy and you want to sell it so you sell it for $1.00 and as soon as you say your selling it someone goes to you straight away and is like "i want to buy it off you however because i dont really need it, im just buying it so you can sell it i want to buy it for $0.80" and the guy who bought it does the same thing to everyone who want to buy and sell candy
Do market makers speculate too?
4:02 you will bid for 2,000 shares, not offer 2,000 shares.
Hello sir ,it's good knowledge from you ,but I have a doubt ,will market maker square off his short selling in a day itself like retailers
Great explanation!
Who is they?
CAN THE MARKET MAKER CAN BUY THEIR OWN SELL?
Please speak more slowly he talked like he was on speed
Another fantastic video, very informative!
GOOD VIDEO SIR!
Thanks mate
Superb!
Can mm create artificial push n pull in order to earn illegally or who watches mm that they operate fairly??
There are regulators who ensure MM always offer at the "best price" for clients. If you think about it as well, they can't remove others orders from the LOB, so if they were quoting bids at lower prices and asks at higher, they would 1. be breaking the rules on the spread they're allowed to offer; and 2. no one would trade with them as there would be better bid/ask prices that people would trade at
Sorry, didn’t inform me one bit. Spreads, Bids, SETS etc, jargon-filled rambling left me non-the-wiser. In truth, I came here to understand what exactly an MM can do as I hear so much about tree shakes and MMs calling holders to try and get stock and lastly placing late trades and/or buys as sells etc. All of this still is a black box to me.
The hint is the name. A market maker makes a market - they provide a price which you can deal on. Without market makers, it would take considerably longer for buyers and sellers to be matched with one another, reducing liquidity and potentially increasing trading costs as entering or exiting positions would be more difficult. Also, check this video out: th-cam.com/video/I4C-5AstEfA/w-d-xo.html
Thanks