Market Making Algorithms
Provide liquidity and profit from bid-ask spreads with automated market making
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0 / 5 completedWhat is Market Making?
Market makers are the backbone of liquid markets. They continuously provide buy (bid) and sell (ask) quotes, profiting from the spread between them. When you place a market order, it's often a market maker on the other side providing instant liquidity.
How Market Makers Profit
📊Bid-Ask Spread - Buy at $99.50, sell at $100.50 = $1.00 profit per share
🔄High Volume - Small profit × thousands of trades = significant daily returns
⚡Speed Advantage - Algorithms execute in microseconds, capturing inefficiencies
Revenue Source
Earn the spread on every matched buy/sell pair
Inventory Risk
Must manage unbalanced positions and price movements
Market Service
Provide liquidity so others can trade instantly
💡 Example: 1 Second in a Market Maker's Life
• 00.000s - Post bid $99.95, ask $100.05 (10¢ spread)
• 00.234s - Buy order hits your ask, you sell 100 shares @ $100.05
• 00.567s - Sell order hits your bid, you buy 100 shares @ $99.95
• 00.999s - Profit: $10 from spread, inventory back to zero