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Question about market makers...

  • #1
  • First Post: Feb 7, 2006 12:58am Feb 7, 2006 12:58am
Okay so I have heard that the market makers will move the market to clear out peoples stops. I can see two reasons why they would do this but I am not sure which one is the real reason. If a market makers clears out a bunch of peoples' stops which are at a loss, does that market maker get that money? Or is the reason they move the market to clear peoples' stops in order to get their own orders filled? In other words, do they sometimes have to get the price up/down to people's stops in order to have someone who will fill their orders?

I don't know, maybe I'm way off but any explanations would be much appreciated.
  • #2
  • Feb 7, 2006 2:54am Feb 7, 2006 2:54am
In general, it is your Broker/MM that has to keep an equilibrium in the shorts and longs. If there's to much of the one or the other, they have to take an opposite position to cover it...

You can imagine how much they like that, so when that happens, they'll start trying to move the market in their favour, and make their opposite position profitable.

So in effect they *do* get your money that way...
  • #3
  • Feb 7, 2006 7:35am Feb 7, 2006 7:35am
Jim, you might want to check out this thread...A lengthy discussion was there about this specific issue although the thread started as a "Trading vs. Gamblin" discussion...

http://www.forexfactory.com/forexfor...ead.php?t=3781


Thanks,

Nader
  • #4
  • Feb 8, 2006 1:12pm Feb 8, 2006 1:12pm
Thanks for the reply's they are very helpful. When you say they have to maintain equilibrium, why do they have to? Or are you saying that it is just in their best interest to do it? Also, if I am essentially in competition with my broker, why do some brokers offer information about the markets to help us make our trades?
  • #5
  • Feb 8, 2006 6:16pm Feb 8, 2006 6:16pm
Quoting narafa
Jim, you might want to check out this thread...A lengthy discussion was there about this specific issue although the thread started as a "Trading vs. Gamblin" discussion...

http://www.forexfactory.com/forexfor...ead.php?t=3781


Thanks,

Nader
Hi Nader,
Thanks for pointing this link. I dismissed the discussion since I never looked at trading as gambling... since I never really gamble.

But anyway, I checked out the thread and you had a very nice discussion with Fanat..

I think there are nuggets there that I can pick up..

By the way, I still haven't posted the info you gave me a few weeks ago (?) since I'm kind of prioritizing things right now.. But anyway, since I think many can benefit from it, I will post it publicly when I have the time.

Thanks again friend.
  • #6
  • Feb 9, 2006 7:28am Feb 9, 2006 7:28am
Quoting eastmaels
Hi Nader,
Thanks for pointing this link. I dismissed the discussion since I never looked at trading as gambling... since I never really gamble.

But anyway, I checked out the thread and you had a very nice discussion with Fanat..

I think there are nuggets there that I can pick up..

By the way, I still haven't posted the info you gave me a few weeks ago (?) since I'm kind of prioritizing things right now.. But anyway, since I think many can benefit from it, I will post it publicly when I have the time.

Thanks again friend.

You are most welcomed my friend But I recall that what we have been exchanging over the email was about stocks mainly, or maybe I can't precisely remember...


Thanks,

Nader
  • #7
  • Last Post: Feb 9, 2006 6:19pm Feb 9, 2006 6:19pm
Quoting narafa
You are most welcomed my friend But I recall that what we have been exchanging over the email was about stocks mainly, or maybe I can't precisely remember...

Thanks,

Nader

You are right.. mostly stocks, plus questions regarding system development..
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