Let’s be honest: most traders don’t get “liquidated by the market”, they get liquidated by their own leverage settings.
Market making is one of the few ways to stay in the arena without living one bad wick away from zero - but it’s not a magic shield. Let’s unpack that.
Directional Trading: One Bet, One Bullet 🎯
Classic setup:
- Long or short with size
- High leverage “to make it worth it”
- One sharp move against you → margin call → liquidation
Your PnL is almost entirely “did I guess the direction in this window?”
Great when you’re right. Career-ending when you’re wrong for 15 minutes.
Market Making: Getting Paid to Be in the Middle 🧱
Market making flips the logic:
- You quote both bid and ask
- You earn spread + rebates, not just “price go up”
- You care about inventory risk, not maxing out direction
In crashes, this matters:
- Volatility = wider spreads
- Wider spreads = more edge if your inventory and risk limits are sane
- You’re not auto-liquidated by one candle because you’re not 50x long at the top
You’re basically trading micro-edges many times, not one big thesis once.
When Market Making Won’t Save You 💀
Market making is not invincibility mode:
- If you let inventory drift heavily long or short → you’re back to being directional
- If you ignore kill-switches and daily loss limits → you can still nuke the account
- If your strategy can’t handle thin books during a crash → enjoy being the only liquidity left
MM protects you from some liquidations by design, but only if:
- inventory caps are enforced
- deltas are hedged or bounded
- you actually respect your own risk engine
If you want to see this in numbers, not theory, I’d recommend reading the story of how Tyler McKnight turned a -10.5% move into a +4.5% result using a market making approach.
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