Market makers aren't banks, they're liquidity providers who profit from the spread between buy and sell prices. When you place a limit order, you're acting as a market maker. Dedicated firms do this continuously to keep markets liquid for retail traders.
most retail traders don't know. A lot of people believe market makers are the banks, but market making firms are a very specific type of firms that have a very specific business model. Market makers are what we call the liquidity providers. So they're not hunting for liquidity. They actually are your liquidity. And you should be thankful they exist because otherwise you would get slipped so hard that you could not be profitable. The reason you can be having an edge is because of the liquidity provided by the market makers. A market maker can be anyone. If I place a buy limit, I'm a market maker. I offer. So I create market for people to interact with. But a market maker A market making firm is a firm that does only market making, which is placing buy limits and sell limits at the best bid and the best ask. What they do is they constantly put orders on the sell side, on the buy side. So the spread that you pay as a trader is the profit margin of market making firms, and the only job they do is providing liquidity.
