Chapter 3 Market Makers, Risk, and the Individual Trader
When I first started trading, I’ll admit, as much trading training as I had, I still felt unprepared. It wasn’t until I went to work for Scott Kaplan at Quiet Light Trading that I ‘got’ risk. He used to say to me, “Great trade . . . where is the edge?” He meant this from a capturing dollars perspective and a risk management perspective. Working for Scott taught me not just how to make good trades, but how to capture those dollars.
How Market Makers Make Money
Let’s start with a simple concept, a NYSE specialist. If I am a NYSE specialist, I might have a stock XYZ worth $100. As a specialist, I might make the market $99.50 at $100.50, 100 shares ‘up’ (meaning I am willing to buy or sell ...
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