1.3 Who actually makes money, and how
In the previous lesson we saw that charts strip away the information you need and create harmful expectations. But if charts and indicators do not work, what does? The answer lies in looking at who actually profits from the markets consistently.
The two sides of the market
In every market there are always two sides. On one side are traders who want to buy or sell right now, with urgency: they use market orders ("Buy me at the current price, whatever it is") and pay a price for that urgency. On the other side are traders who wait to be filled: they place limit orders ("I'll buy at this price and no higher; if someone sells it to me, great, otherwise I wait") and get paid for that patience.
The market maker always stands on the side that waits, and the price they collect for their patience is the spread: the difference between the price at which they buy (bid) and the price at which they sell (offer).
They are not a gambler, they are a bookmaker. The bookmaker does not bet on who will win the game; they set the odds so they profit regardless of the outcome. The market maker does exactly the same thing with the spread.
The mathematical edge of the spread
To understand how powerful this difference is, let's work through an exercise with concrete numbers.
Take a simple spread: Bid 100 / Offer 101.
Scenario A: you buy on the offer (at 101), like the retail trader
After the purchase, price can move up 1 tick, stay flat, or drop 1 tick. At each level, you can exit by selling on the bid or the offer, which gives 6 possible outcomes:
| Price after | Exit on bid | Exit on offer |
|---|---|---|
| Rises to 102 | Sell at 102: +1 tick | Wait for offer at 103 (unlikely) |
| Stays at 100/101 | Sell at 100: -1 tick | Sell at 101: breakeven |
| Drops to 99/100 | Sell at 99: -2 ticks | Sell at 100: -1 tick |
Result: only 1 outcome out of 6 is a profit, 2 are breakeven, and 3 are losses. The retail trader has a 17% probability of profiting on any random spread.
Scenario B: you buy on the bid (at 100), like the market maker
Same situation, same 6 possible outcomes, but the numbers flip:
| Price after | Exit on bid | Exit on offer |
|---|---|---|
| Rises to 101/102 | Sell at 101: +1 tick | Sell at 102: +2 ticks |
| Stays at 100/101 | Sell at 100: breakeven | Sell at 101: +1 tick |
| Drops to 99/100 | Sell at 99: -1 tick | Sell at 100: breakeven |
Result: 3 outcomes out of 6 are profitable (one of them a double profit), 2 are breakeven, and only 1 is a loss. The market maker has an 83% probability of not losing on any random spread.
[ comparative diagram of the two scenarios: on the left "Buying on the offer" (17% probability of profit), on the right "Buying on the bid" (83% probability of profit), with the 6 outcomes color-coded in green (profit), yellow (scratch), and red (loss)]
Read those numbers again: 17% on one side, 83% on the other, in the same market, at the same moment. The only difference is where you place your order. This is why entire firms exist whose sole business model is "making the spread," from CFD brokers to forex platforms. The spread is incredibly powerful, and most retail traders systematically give it away to someone else.
The three numbers that matter
In our approach there are three fundamental metrics.
1. Win Rate, target: 80%
Out of 10 trades, 8 close in profit. Is this realistic? Yes, because if you trade from the right side of the spread you already start with an 83% probability of not losing, and by adding the ability to read flow and market value in real time, that number can only improve.
2. Scratch Rate, target: 10%
A scratch is a trade closed at breakeven, where you buy and sell at the same price. You do not make money, but you do not lose any either (aside from commissions). A scratch is not a failure, it is a defensive success: you assessed that conditions were not favorable and got out without damage.
3. The 90% rule
Combining win rate and scratch rate:
80% wins + 10% scratches = 90% of trades that cost you nothing (or make you money).
Only 10% result in a loss, and those losses, if managed correctly with quick exits and minimal damage, have a marginal impact on overall performance.
[ infographic showing the three target numbers for a professional scalper: 80% winning trades, 10% scratches (breakeven), 10% losses, displayed as a color-coded horizontal bar]
Tick size matters
Not all instruments are equal, and tick size affects the ratio between profit and cost.
Large-tick instruments (e.g., Treasury Bond, tick value $31.25):
- One tick of profit: approximately $28 after commissions
- One scratch: approximately $3.50 in cost (commissions only)
- Profit is roughly 8 times the scratch cost
- You can afford more scratches: for example 60% wins + 30% scratches works just fine
Smaller-tick instruments (e.g., E-Mini S&P 500, tick value $12.50):
- One tick of profit: approximately $9 after commissions
- One scratch: approximately $3.50 in cost
- Profit is roughly 2.5 times the scratch cost
- You need higher win rates (70%+) to compensate
In both cases, the goal remains the same: maximize the percentage of trades that do not lose money.
The power of frequency
The difference between scalping and directional trading is not just in the success rate, it is in frequency. The spread presents itself continuously, tens of thousands of times every trading day: a scalper trades the spread with dozens of opportunities per day, while a directional trader finds 2-3.
Let's compare:
The directional trader: 2 trades per day x 15 ticks average x 35% win rate. Losses on the losing trades (the 65%) quickly erase the profits.
The scalper: 20 trades per day x 1 tick x 75% win rate = 15 ticks of gross profit, with only 5 losses to manage and minimize.
Frequency is the multiplier that turns a small edge into significant results. And there is another crucial advantage: at the end of every session you are flat, with no open positions, no overnight risk, no surprise morning gaps, and no anxiety from holding a position.
The most costly mistake
There is a concept many beginners underestimate: over dozens of trades per day, even a single tick of difference between a loss and a breakeven produces a massive impact on the bottom line.
If you take 30 trades per day and on 5 of them you lose 1 tick instead of scratching, that is 5 ticks lost, which becomes 25 in a week and 100 in a month. On the E-Mini S&P 500, 100 ticks is $1,250. The discipline to exit at breakeven when a trade is not working, instead of waiting and hoping it "comes back," is perhaps the most important skill you will develop in this course.
What you need to get started
To trade market-maker style you need three things:
- A platform with DOM and Tape: any futures trading platform offers them (NinjaTrader, Sierra Chart, Jigsaw, and others)
- A market with a 1-tick spread: most major futures (ES, NQ, FESX, FGBL, ZB, ZN) have a regular 1-tick spread during active hours
- The skills you will learn in this course: knowing what to look for and how to interpret it
You do not need special indicators, automated systems, or signal subscriptions. You need your eyes, your DOM, your tape, and a clear process.
The DOM Drift Signal, our proprietary software tool, automates and quantifies many of these assessments. We will introduce it gradually in the upcoming lessons, but first you will learn to do everything by eye, because understanding what you are looking at is the prerequisite for using any tool intelligently.
Key takeaways
- The market maker is not a gambler, they are a bookmaker: they profit from the spread regardless of direction
- Buying on the bid gives an 83% probability of not losing; buying on the offer gives only 17%, in the same market, at the same moment
- Target: 80% win rate + 10% scratch rate = 90% of trades that do not lose
- Tick size matters: large-tick instruments (Treasury Bond) forgive more scratches, small-tick instruments (E-Mini) require higher win rates
- Frequency is the multiplier: 20 trades per day x 220 days turn 1 tick into significant results
- Every tick counts: the difference between a scratch and a loss compounds over time