MARKET MAKERS

Market Maker (MM) is a brokerage or bank that maintains a firm bid and ask price in a given security by standing ready, willing, and able to buy or sell at publicly quoted prices (called making a market). These firms display bid and offer prices for specific numbers of specific securities, and if these prices are met, they will immediately buy for or sell from their own accounts. Market makers are very important for maintaining liquidity and efficiency for the particular securities that they make markets in. At most firms, there is a strict separation of the market-making side and the brokerage side, since otherwise there might be an incentive for brokers to recommend securities simply because the firm makes a market in that security.

Market Makers test the highs and lows in the first hour of the trading session for market direction. This is the rudder for the day. After the first hour, prices can be highly erratic from the publics' emotional trading, even to a point outside of the first hour's channel. The last hour is the confirmation of the direction where prices normally settle back to a sensible range. This is why you sell in the first hour trying to capture the peak of the MM's range test, and buy in the last hour or check your mental stop at the confirmation price.

A hard stop loss with your broker is like a For Sale Sign to the market makers and they will spike toward the stop and flick it off like a frog's tongue on a mosquito, then return to the base trading range immediately afterward; you can see this event every day at the open and close on a minute real time chart.

MM's are repeatedly triggering your stops.  They can't see a Trailing Stop, but they know how the public thinks, and spike up and down within the ranges of typical stops every day during the first hour of the trading session and at the close.