How to Be a Market Maker

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How to Be a Market Maker. We know about the stock trading floor's hustle and bustle after the bell rings. Find out what it takes to be part of the excitement. A market maker maintains stock market liquidity by trading large blocks of assigned stock based on demand. Besides turning a profit, market makers create trading efficiency.

Obtain broker-dealer affiliation. Traditionally, a given stock exchange appoints market makers based on experience and broker affiliation. With the advances of the Internet providing rapid transactions, day traders become their own market makers.

Gain direct access to the stock market by opening a trading account and/or registering as a representative of a broker-dealer. To become a registered representative, you must successfully complete the Series 7 securities exam. Firms like Bright Trading will sponsor you to take the test and allow you professional broker-dealer affiliation (see Resources below).

Utilize trading software that allows for analysis, stock movement tracking and trade execution. Broker and industry websites often provide free tools. However, you can subscribe to websites such as Visual Trader to take advantage of real time stock statistics (see Resources below).

Acquire knowledge about stock market cycles and the characteristics of companies which draw market activity. Industry magazines, newspapers, company prospectus reports and investment websites provide vast information regarding the market climate and trading strategies.

Tips & Warnings

  • Mock trading sites allow you to practice trading strategies without risking your own capital (see Resources below).
  • Unlike day traders who ride the current of a given stock to earn a profit before the tide changes, market makers ensure that both sides of a transaction exist to maintain an efficient market while making a profit.
  • You must familiarize yourself with the rules and regulations of the securities exchange to trade legally and safely.
  • You must educate yourself about investment instruments and the companies or industries associated with them to reduce financial risk.

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