What causes the ASK and BID price to change? | Traders Hideout


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What causes the ASK and BID price to change?

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artemiso View Post
This is also why people describe market making as similar to running a casino. You have a built-in edge into the game so that whether people buy or sell from you, you make money.

But it's not that easy, because there's a lot of other casinos that people can go to to place the same bet, and the exchange facilitates electronic quoting of every market maker's best bid and offer, which makes the pricing extremely competitive.

It's easy for me to make money if I'm the only market maker on the Jazz game quoting 1 point against 200 points, but if there's another market maker quoting 90 points against 110 points, he takes away all of my business.

Another interesting corollary of this is that any accusation that electronic market makers make money at the expense of regular traders is just impossible.

The market maker who beats me with a spread of 90-110 only takes away all of my profit, but the people who are actually betting at the casino are being offered a better price.

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