What is a market maker?
In one line: A market maker is a firm that stands ready to buy and sell a market all day, quoting both prices and earning the small gap between them.
The short answer
When you click "buy," someone has to sell to you. Often that someone is a market maker.
A market maker quotes two prices at once. A price they'll buy at (the bid) and a price they'll sell at (the ask). The small gap is the Spread, and that's how they earn.
A simple example
A market maker quotes a stock at:
- Bid: $25.00 (they'll buy from you here)
- Ask: $25.02 (they'll sell to you here)
You buy 100 shares at $25.02. A minute later someone sells them 100 shares at $25.00. The maker earned 100 × $0.02 = $2, before costs.
The risk is real for them too. If price drops before they find a buyer, they lose on the shares they're holding.
Where you meet them
- Stocks. Big trading firms handle a large share of US retail orders. Some brokers get paid for sending orders there, called payment for order flow. Brokers must tell you about it.
- Forex. Many retail forex brokers act as the market maker themselves. That's a Dealing desk broker. Others pass orders on, see ECN broker.
- Options and futures. Market makers quote prices across thousands of contracts.
Why it matters
Market makers provide Liquidity. Without them, you might wait a long time for someone to take the other side.
Their spread is part of your cost on every trade. Wide spreads at quiet hours or around news are them protecting themselves. Our market vs limit order guide shows how to control what you pay.
A common mistake
Thinking the market maker is "hunting" your stop. A maker earns the spread on lots of tiny trades. They don't need your one stop. Price often runs past obvious levels because many traders put stops there. More in do stop losses get hunted?
Check the spread before you trade. A wide spread means you start each trade further from breakeven.
Questions
How do market makers make money?
Mostly from the spread: buying a little lower than they sell, many times a day. Some also get rebates from exchanges.
Is a market maker on the other side of every trade?
No. Sometimes your order matches directly with another trader's order. Market makers fill the gaps when no one else is there.
Are market makers regulated?
Yes. In the US, stock market makers are overseen by the SEC and FINRA. Forex dealers register with the CFTC and NFA.
Want the next step? We'll walk you through it.
Four free lessons by email, one every few days — each with a 10-minute exercise on a real chart.
Send Me the Free Lessons 4 short emails · No spam · Unsubscribe anytimeOr see the whole method, step by step:
See What’s Inside the Course Try everything free first. Decide when you're ready. · Open the free chart tool (works in the TradingView phone app)One chart idea a day, in plain English. Follow along: