If you have ever wondered how your trade gets executed so fast or why prices seem to shift in moments, the answer often involves market makers. While they tend to operate behind the scenes, their influence in the world of Share CFDs is significant. Understanding who they are and how they operate can give you an edge when navigating volatile markets.

They Keep the Wheels Turning

At the core, a market maker provides liquidity. They are always ready to buy or sell, quoting both a bid and an ask price. This makes it easier for traders to open or close positions quickly, especially in fast-moving environments.

When trading Share CFDs, you are not buying or selling the actual shares. Instead, you are dealing with a broker who often acts as the market maker. This broker sets the prices you see on your platform, and their goal is to ensure there is always someone on the other side of your trade.

Determining the Prices

Market makers do not just invent prices at random. Their quotes are usually derived from the underlying market, such as the real-time stock exchange. However, spreads and slight variations can occur, especially in less liquid markets or during periods of high volatility.

With Share CFDs, the price you see is influenced by both the underlying asset and the broker’s spread. This is how brokers manage their risk and keep things running smoothly. While it might not be the exact stock exchange price to the decimal, it is close enough to mirror the real market while still allowing room for execution and transaction costs.

They Can Absorb Shock During Volatile Periods

One of the biggest benefits of market makers is their ability to provide pricing during extreme conditions. In times of uncertainty or low trading volume, they step in to ensure that the market does not freeze up. That means you are more likely to find a price and execute your trade, even when the rest of the market feels chaotic.

This reliability is a major advantage when trading Share CFDs. Quick execution during sudden price swings can make a difference in your outcome, especially for short-term traders.

The Misunderstood Role of Market Makers

There is a long-standing myth that market makers are always trading against the client. While it is true that sometimes they take the other side of your trade, that does not automatically mean they are out to beat you. Most operate under tight regulatory frameworks and aim to create a fair, balanced environment.

Many brokers offering Share CFDs hedge their exposure through other instruments or by offsetting client positions. Their main interest is in the spread and maintaining long-term trading volume, not necessarily trying to predict your next move.

Knowing that market makers help drive the trading environment should encourage you to factor spread costs into your decisions. It is also worth understanding how liquidity may shift during different times of the day or during major announcements.

For those trading Share CFDs, being aware of the broker’s pricing model and how market makers operate can improve your timing and help you avoid unnecessary slippage. It adds a layer of strategy to your execution that goes beyond just technical signals or news events.