How Does Market Making Work? (discretionary)

Quote from JuniorCTA:

All quotes are "smart" quotes. There is never a time a limit order is displayed without an immediate cover.

ie. the profit on the trade is accounted for in the quote you see. You hit/lift that quote, the profit has already been booked on the MM side.
More...
Can you please expand on the "smart" quotes ?
or point to some reference material about it?
I'm not familiar with the concept.

Thanks.
 
Quote from eusdaiki:

Can you please expand on the "smart" quotes ?
or point to some reference material about it?
I'm not familiar with the concept.

Thanks.
More...

I'm not familiar with that term either. I was a MM for many years. My quotes were not always Smart!
 
Quote from eusdaiki:

Can you please expand on the "smart" quotes ?
or point to some reference material about it?
I'm not familiar with the concept.

Thanks.
More...
Quotes priced off the hedge, + a margin.

Get hit/lifted on the quote, pay the spread on the hedge, and you're done.

Next punter please.
 
Quote from thesniper:

I think 90% of profitable daytraders are just market makers. They just supply liquidity without trying to outsmart the market. The daytraders that try to outsmart the market are the ones that end up losing because they fail to realize the overwhelming randomness of the market.
More...

This.

You can tell the "casinos" from the "gamblers" here very easily...
And the "gamblers" are little more than degenerates.

Providing liquidity for $$$ is an honest living...
Even if society lumps you in market manipulators and retarded degens.

Plus there are the Service Providers...
Who charge FAT fees, but take zero risk...
They promote maximum complexity so they sell you A, B, and C...
Or the opposite... anyone can get rich "draining the banks"...
Most of the intelligent posters on ET fall into this category.
 
Quote from Rationalize:

Quotes priced off the hedge, + a margin.

Get hit/lifted on the quote, pay the spread on the hedge, and you're done.

Next punter please.
More...

Exactly. Only people hitting or lifting those quotes are complete morons or completely off their market and don't give a shit
 
Quote from JuniorCTA:

Exactly. Only people hitting or lifting those quotes are complete morons or completely off their market and don't give a shit
More...

other market makers aggressively screwing-up can be entertaining.. other than the initial pang of worry that it might be "us" off price.

good times..
 
Quote from thesniper:

I think 90% of profitable daytraders are just market makers. They just supply liquidity without trying to outsmart the market. The daytraders that try to outsmart the market are the ones that end up losing because they fail to realize the overwhelming randomness of the market.
The simplest definition of market making is buying at the bid with a limit order and selling at the ask with a limit order. But it can't be that simple otherwise everyone would be doing it.
So on what basis is liquidity supplied? Tape reading? TA? Momentum? RTM? I also can't imagine averaging up or down can result in profitable market making. I thinks most successful market makers basically trade like 20 stocks all in and all out using limit orders and with the benefit of low commissions and a fast platform. And if they get too much long/short exposure they hedge with futures. Is this correct?
Market making is as old as the markets, however I just can't find any good information in it. Please post some good books or blogs about the subject.
It's probably a dying business (the discretionary side of it) due to automation but still want to learn how and why it works.
More...

So MM's get filled by the public then? Can they make money on a stock that has a 0.02 spread? Do they prefer a 0.02 spread or a 0.10 spread?
 
Quote from zbojnik:

So MM's get filled by the public then? Can they make money on a stock that has a 0.02 spread? Do they prefer a 0.02 spread or a 0.10 spread?
More...
Depends on the price of the stock.

Ideally a 0.10 spread on a 0.02 stock :p
 
You must log in or register to reply here.
Back
Top