What it means
Market makers are why you can almost always trade instantly. They pull back around big news, which is when spreads widen.
In practice
A market maker stands ready to buy from sellers and sell to buyers, so you do not have to wait for another trader who wants the exact opposite of your order. Its profit is the spread, earned many times over, not a bet on direction.
Market makers manage their own risk by adjusting quotes. When they are unsure, around data releases, at the open or in thin hours, they quote wider and smaller, and that is exactly when market orders get worse fills.
What to watch for
Trading forums often blame market makers for hunting individual stops. In practice price is drawn to areas where many orders rest because that is where large trades can be filled, not because of any one trader's stop.
Related terms
4 terms- SpreadThe gap between the ask and the bid; a cost you pay on every round trip.
- LiquidityIn SMC, the pools of resting orders, especially stop-losses, that sit beyond obvious highs and lows.
- BidThe highest price a buyer is willing to pay right now. You sell at the bid.
- AskThe lowest price a seller will accept right now. You buy at the ask.