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Market making is not really like directional trading. When a market-maker trades, the price is very likely to move against them afterwards. To be profitable, al
by evanpw 11y ago
Market making is not really like directional trading. When a market-maker trades, the price is very likely to move against them afterwards. To be profitable, all that they need is for the price to move against them by slightly less than the spread (the gap between the price they offer to buy at and the price they offer to sell at) on average. Something like a random walk is exactly what a market maker wants; trending prices are bad.
- Ntrails 11y agoThe price will definitely move by more than you make on the spread - but you might win or lose on that. In simple terms what you lose on the swings you gain on the roundabouts.
- lintiness 11y agomost market makers lay trades off against other securities. they quote against bids and offers in other corners of the markets (some relationships are more esoteric than others).