I found this comment on another board. Familiar?
The market maker is the strongest trader
He is the one who takes the other side of a trade and makes a mostly riskless business with the spread, the difference between buy and sell price. Furthermore, he has state of the art equipment, which he watches like a hawk all day in a big room with others doing the same, hoping that many hawkish eyeballs are seeing more than single prey's ones. The market maker is known to be in a strong trading position, as he works for a big company with real money, which other traders fear.
With the capital behind him he is able to drive prices up and down, enticing euphoric investors into high prices and shaking out trembling ones with a loss at low prices. For example, the market maker likes to initiate breakouts. He is buying low within a price range that he even may have formed for that reason, bringing the price to the upper edge and selling higher into the following rush of buyers, who may falsely interpret this breakout as a signal. The same game can be played with first fuelling a trend to an exaggerated level and then bending it around and initiating a swing into the opposite direction.
If investors fall victim to these traps they are called sometimes the "weak hands",because they are doing the opposite of what real investors are supposed to do, namely buying cheap and selling higher, never or on changing fundamentals only. They are confused investor-traders, market participants who mix trading and investing strategies in an uncontrolled manner, a sure way to burn money. One extreme is the trader who misses his stop and decides at much lower prices to become an investor and the other one is the investor who finally becomes weak and sells with a severe loss. The worst case is oscillating between both extremes.
