Risk ShieldBe Careful of Market Makers: (You Can’t Beat Them)By Mehrzad Abdi | 12 May 2025Abstract
Market makers are vital players in modern financial markets, as they provide liquidity and ensure smoother trading operations. However, the asymmetry of information, capital, and technology between market makers and individual traders creates a significant imbalance, often to the disadvantage of the latter. This article explores the functions and strategies of market makers, the risks individual traders face, and how a robust risk management framework is essential for mitigating such dangers. Drawing on seminal works including Trading and Exchanges by Larry Harris, Market Wizards by Jack D. Schwager, Reminiscences of a Stock Operator by Edwin Lefèvre, and Trading for a Living by Alexander Elder, this article provides a comprehensive review of these dynamics and practical advice on protecting one’s investments.