a market maker (MM) (citadel, optiver) etc makes money in the most part by filtering a trade from customer, and then agreeing or disagreeing with its sentiment. If you buy say msft at $480 and they think it will dip below $480 they will 'hold risk' and wait for it to dip to say $470 then execute your trade, making $10
except instead of aiming to make 2% on a single trade, they aim to make maybe 5 cents this way on a $480 stock, mostly holding for less than a few seconds, on millions of trades an hour
thus, robinhood very valuable because it encouraged retail investors to have high trading volume on complex instruments. that "order flow" then sold to MM like above for fixed rates or % shares.
MM are ultimately a good thing because they provide liquidity. there is always a person willing to take the other side of a trade when you click. if you trade in a boondocks stock market like singapore or new zealand you will quickly see the market run dry and you cant get out of a position
> MM are ultimately a good thing because they provide liquidity. there is always a person willing to take the other side of a trade when you click
At the end of the day, it's not clear where the liquidity is going to come from unless there are non-middlemen buyers on the other side.
Reducing typical spread and commission fees seems like a more realistic benefit.
Basically anything that amounts to a side-bet rather than a trade recorded on an exchange should (IMO) be avoided, and you're putting yourself in a situation where you and your broker have an adversarial relationship.
There's a part where he sets up a trust so that his family will money the next time he goes bust (which happens constantly in the book), and tells his wife that he will beg and plead for the money but she has to refuse him. That feels to me like the behavior of an addict capitalizing on a moment of lucidity to protect loved ones from their addiction.
The real Jesse Livermore died penniless by suicide. The book doesn't address his depression, but I think you do see it in what's not in the book. They don't really talk about the character's friends. They don't seem preoccupied with their wife or their children.
He was a problem gambler, but I think if we looked at top poker players of today, they'd all have some love the gamble in them. Jesse had godly tape reading skills that allowed him to beat the bucket shops at the start of his career.
After being kicked out of the bucket shops, he should have just become a floor trader and in all likelihood, he'd have had lower highs but would have fared a lot better overall. A lot of the trading cliches like cutting trading losses quickly, letting profits run, averaging up rather than down originate from this book. There is a reason people still talk about it 100 years after its publication. It's a good contender for the best trading book of all time.
It’s kind of funny to see the similarities in this book. Like the bucket shops, there was a simulation environment with live market data where trainees had to prove themselves before they can move onto live trading. It turned out that a lot of folks were pretty good at the fake/simulation training but failed miserably with live trading due to their orders actually influencing the market. The firm only lasted a few years.
"And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!"
vajrabum•1mo ago
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