Why does the price move? The answer is here!!! - page 22
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Last is the price of the last transaction made, whether buying or selling?
Exactly right.
The chart shows the price of the last transaction, in the cup the current bid and ask prices.
SZY: the price has changed but no transactions have taken place, but the price has changed but no transactions have taken place... )
Here is the transcript of one webinar on reading the tape. It describes the mechanism of price movement in the market with accessible examples.
http://ifolder.ru/29004718
I am against the notion that the market maker puts out limits in a staircase and that if, for example, they buy, they select volumes first at one price, then at a higher price, then even higher, etc. And thus the price is pushed upwards. In my opinion, this is complete nonsense! Ask yourself a question, who or what can prevent the market maker from holding the price? Buy at this price? They may sell it again at the same price. Buy again? Compete again at the same price. Who or what prevents the market maker from trading this way? The correct answer is NO ONE, only his personal losses. If the market maker sold, he will have to buy back sooner or later. That is his responsibility. And the market maker will try to buy back at a cheaper price. Therefore, if they buy from him, he (the market maker) will reduce the price. Therefore, if the price goes up, it can only mean one thing - most large market participants sell and the market maker buys in order to sell later at a higher price.
MM's price change depends not only on his desire to increase profits, but also on how his position changes. Because if the majority sells and prices rise, then the virtual profit of MM increases, but to realize it the crowd should start to buy at these higher prices already more than sell. This is not a fact.
And on what basis are you comparing Ask and Bid to Last price? What you have shown is the spread, i.e. the difference between the best bid and ask prices, which in turn are only intentions to sell or buy, but not the trades themselves.
Now look carefully at your picture again. Let's assume that what you have underlined are indeed bids from market makers. Suppose we now need to sell 1,000 GDH2 contracts. Let's assume that there are no market makers at 1789.8 and there is only 1 contract. Then our sale would look as follows:
I.e., without market makers at 1789.8, we would get a spike with an insane slippage and our real exit price would be $3.8 worse.
In this example, it is well demonstrated how necessary and useful market makers are in the market. Without them, the price chart would be covered with a lot of hairpins, and traders would be constantly being ripped off at inadequate prices.
Before you write all this nonsense about market makers and the grand conspiracy theory, try to understand what the market price is and how to work with it.
How often do you sell 1,000 lots of gold? )
Don't you make trades at the previous price?
You described it correctly, I understand that. If we enter the market with such a lot, then without a market maker the price will shift. And have you seen how these market makers in a fast market remove their bids? Will you buy/sell on your own when it is not profitable?
There are no deals, but the price (I call price the current best buy and sell price) moves.
The only reason is that the market maker can increase or decrease the price.
Look at the webmoney exchange, there are no market makers there. So what does the price do? Stands still: the current dollar exchange rate for roubles is 29.03 (central bank), and there ~30.5
And on what basis are you comparing Ask and Bid to Last price? What you have shown is the spread, i.e. the difference between the best bid and ask prices, which in turn are only intentions to sell or buy, but not the trades themselves.
Now look carefully at your picture again. Let's assume that what you have underlined are indeed bids from market makers. Suppose we now need to sell 1,000 GDH2 contracts. Let's assume that there are no market makers at 1789.8 and there is only 1 contract. Then our sale would look as follows:
I.e., without market makers at 1789.8, we would get a spike with an insane slippage and our real exit price would be $3.8 worse.
This example clearly shows how necessary and useful market makers are in the market. Without them, the price chart would be covered with a lot of hairpins, and traders would be constantly being ripped off at inadequate prices.
Before you write all this nonsense about market makers and the grand conspiracy theory, bother to understand what the market price is and how to work with it.
all of this applies to exchange markets organised according to the double auction principle. Many exchanges no longer have MMs at all, and where they do, their influence is negligible.
The main turnover of the currency market is not on an exchange. Even the ECN pseudo-exchange platforms have liquidity providers and the vast majority of transactions are based on their bids and offers. So, the price formation on the exchange market and on FX is significantly different.
I.e. price formation on the stock market and on FX is significantly different
Moreover, why then associate market makers with the Dark Vaders of the stock market?
even the MICEX website describes all the requirements for MMs and their control formulas. Therefore, it is quite a public and open specialty
Knowing how you can make a profit and not take advantage of it, isn't that silly?
Or alternatively, knowing how you can protect yourself from loss and not take advantage of it