Market makers tend to oftentimes be surrounded by a bit of an aura of mysticism in light of the fact that other market participants consider them all-knowing entities who can do no wrong.
Is that the case?
Most definitely not. Instead, why not look at market makers as liquidity providers so as to see them for what they actually are: yet another market participant, with pros as well as cons associated with their status.
In approximately one minute, this video explains what market makers are, why the liquidity they provide tends to be quite useful and what the (in)famous bid-ask spread is all about.
If you are new to trading/investing, all of this terminology might seem confusing but in true One Minute Economics fashion, I’ve explained these concepts in a way that leaves little room for interpretation.
After watching this video, you will understand why market makers are important actors in the ecosystem (yes, for primarily liquidity-related reasons), why knowing a thing or two about the bid-ask spread is recommended and… well, why you should care 🙂