A market maker in the USA (also called a specialist) is a professionnal trader who makes a living out of the spread in a given stock, index or commodity. They try to delay and group buy and sell orders in order to create a discrepancy in price which they can then take advantage of. In return they provide liquidity for all the other players.
Outside the USA a market maker is a CFD broker. Contracts for difference are not allowed in the USA in order to protect your options market. Trading CFDs you deal with your CFD provider - not a stock or commodity exchange. The CFD market maker offers trading in stocks on many world exchanges, foreign exchange, commodities, great leverage, small risk capital all from one account.
A market maker is a professioanl term used a for a professinal trader that works either through a connection on an exchange or on the actual floor of an exchange. Another way to think a market maker as is a broker because they that capablity but only to companies that want to be public and are already public.
Market makers get by what is called a spread. A spread is the difference between the Bid and Ask price people see everyday on all stocks. For example, the bid price of stock A is 1.00 and the ask price is 1.10, so the differece is 10 cents and that is the spread. The ask price is what the market maker is requesting for the stock and the bid price is what most investors want to pay, now that does not mean that the stock is worth the bid\ask. The bid\ask spread will change constantly during the trading day as news about the comapny filter through and the overall market, so always do research.
The difference of a stock is paid to the market marker. Remember that this may hold a lot of the stock and trades alot, so 10 cents on one share but on hunfreds to thousand shares a day will had up and the spread may be more or less on any given stock on any given day.
From a Volume Spread Analysis point of view, a Market Maker is a professional trader who usually has access to privileged information such as where the blocks of pending buy and sell orders are set and can therefore plan their trades accordingly. They are the ones who move the prices in the different markets due to their huge positions and often act in accordance with each other to determine the direction the price will take.
Thorough VSA, you try to determine what their intentions are by studying volume, spread/range of the bar, close position and price action in the background.
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