You’re in the markets, staring at the flashing numbers, charts moving up and down, and the constant tug-of-war between buyers and sellers. You think you’re competing against other traders like yourself — human beings with emotions, impulses, and instincts. But in reality, much of the action is dictated by invisible hands: market maker algorithms.
These high-speed, high-frequency algorithms don’t trade like you do. They don’t hesitate. They don’t feel fear or greed. They operate with precision, designed to capture spreads, absorb liquidity, and create the very conditions in which you execute your trades. Understanding how they work can be the difference between getting constantly played or playing the game with a strategic edge.
Market Makers: Who They Are and What They Do
Market makers are the backbone of financial markets, providing liquidity by quoting both a buy (bid) and a sell (ask) price for securities. Traditionally, market making was done by humans on trading floors, but today, sophisticated algorithms dominate this space.
These algorithms are designed to:
- Tighten bid-ask spreads, making trading more efficient.
- Absorb supply and demand imbalances, preventing erratic price swings.
- Execute trades at lightning speed, often in microseconds.
- Profit from the tiny discrepancies between buy and sell prices.
They don’t care about fundamental analysis, your RSI signals, or your Fibonacci retracement levels. They operate based on raw data, probabilities, and execution efficiency. If you’re trading in any liquid market — stocks, forex, crypto, futures — you’re up against them. So how does this affect your strategy?
The Invisible Impact on Your Trading Strategy
Let’s break it down. The impact of market maker algorithms on your trades is both direct and indirect. Directly, they set the conditions under which your orders get executed. Indirectly, they manipulate liquidity, price movement, and even trader behavior. Here’s how:
1. The Spread Game – Know the Costs
Ever notice how the spread widens during volatile market events? That’s not by accident. Market maker algorithms adjust their bid-ask prices dynamically to manage risk. When uncertainty rises, they widen the spread to compensate.
What does this mean for you? If you’re a short-term trader or scalper, spreads can eat into your profits. A one-pip increase in the spread can turn a winning strategy into a losing one. The lesson? Always factor in spread fluctuations when entering and exiting trades. If spreads are abnormally wide, it might be best to sit tight.
2. Stop Hunting – The Unforgiving Liquidity Squeeze
How many times has this happened to you? You place a stop-loss, only to see price hit it exactly before reversing in your original direction. Frustrating, right?
That’s the work of liquidity-seeking algorithms. Market makers need orders to fill their books, and they know that retail traders love setting stops at obvious levels — support, resistance, round numbers. When liquidity is low, algorithms hunt these levels to trigger stop orders and create the necessary volume for their own trades.
The takeaway? Be strategic with your stop placements. Instead of placing them at obvious support or resistance levels, consider slightly widening your stops to avoid getting wicked out.
3. Slippage – The Silent Killer
Market makers prioritize orders that bring them the most value. When liquidity is thin, they may not fill your order at your intended price. Instead, you get “slippage” — a worse execution price than expected.
Slippage is common in fast-moving markets, particularly during major news events. If you’re trading around news releases, expect price gaps and poor fills. The solution? Use limit orders instead of market orders when possible to control execution prices.
4. The Illusion of Liquidity
You see a massive order sitting on the order book, providing a sense of strong support or resistance. But as soon as price approaches that level, the order disappears. You just fell for a classic trick — spoofing.
Market maker algorithms use techniques like order layering and spoofing to manipulate trader psychology. They create an illusion of liquidity to influence price movement, but those orders aren’t real. They’re just bait.
How do you counter this? Stop making trading decisions based on visible order book levels. Instead, focus on deeper price action signals that show real intent.
5. The Speed Advantage – Why You Can’t Beat the Bots
Market maker algorithms execute trades in microseconds. No matter how fast you click your mouse, you’ll never match their execution speed. This means that in volatile conditions, you could end up missing entries or getting delayed exits.
Instead of trying to compete on speed, adjust your strategy to focus on areas where algorithms struggle — like market inefficiencies, longer-term trends, and structural setups that take time to develop.
Turning Market Maker Algorithms Into an Advantage
Now that you know what you’re up against, how can you use this knowledge to your advantage? Here are a few strategies:
- Trade With the Trend, Not Against It: Market makers provide liquidity but rarely push against dominant trends. If you align with strong momentum, you reduce the risk of getting manipulated.
- Be Unpredictable: Instead of placing standard stops or limit orders, use dynamic levels to avoid getting picked off by liquidity sweeps.
- Think Like an Algorithm: Algorithms react to liquidity and volume. If you can recognize liquidity zones, you can predict where price is likely to gravitate.
- Avoid Overtrading: Market maker algorithms love traders who chase trades impulsively. The more you enter, the more they profit from spreads. Be selective.
Kirill Yurovskiy’s Take on Market Makers
Kirill Yurovskiy, a trader with deep expertise in market structure, often emphasizes the importance of adapting to algorithmic trading environments. Instead of seeing market maker algorithms as an enemy, he suggests traders should learn to “ride their waves” by identifying key liquidity zones and adjusting risk management accordingly. By thinking one step ahead, traders can avoid common pitfalls and use the algorithmic flow to their advantage.
Final Thoughts: Adapt or Get Played
Market maker algorithms aren’t going anywhere. If anything, they’re only getting smarter. They shape the market conditions under which you trade, influencing spreads, price action, and execution quality.
The key to thriving in this environment isn’t trying to out-speed the algorithms — it’s about adapting your strategy. Recognize their patterns, avoid the traps, and learn how liquidity moves. Because once you do, you stop being the one getting played and start playing the game with a real edge.