It’s estimated that between 30-50% of recent market volume is caused by market makers, which is an alarming increase over prior periods.
Anyone who thinks they can ‘time the market’ has the deck stacked against them higher and higher as a result; they likely are buying and selling at a delta from what the market makers are getting.
With the advent of computerised systems and methods, especially in the last decade, an argument can be made that markets are getting more efficient (the perceived value of any security is immediately factored into it’s price), but, transversely, during times of volatiliy, more inefficient (market makers’ effects on the markets create magnified swings that may not take place otherwise).
Why is this important?
Because any individual investor who thinks they can time the market needs to understand what they are up against: Not only professionals who time the market for a living, but also computerised systems and algorithms that trade not in a second, but a millisecond.
It’s sobering, but it’s the way markets are structured now.
This is partially why we are seeing more volatility than in the past.
(Disclosure: I am a Fee-Only Financial Planner. My website is here.)