For every stock purchase there is a seller, and for each buy there is a sell. There are huge pension funds, medium sized funds, small funds, and tiny funds. There are well managed funds and poorly managed funds. There are investor groups, individual investors who are wealthy, and individual investors who are just making ends meet. There is the odd lot investor who buys just a few shares, and the Options players and Futures players. There are also the market makers, who are the savviest day traders on the planet.
Market Makers are in this to make money for their company, but they must abide by the rules. They typically do not want to ever be holding a position at the end of the day. Their responsibility to the market is to "make a market" by stepping in if there is no buyer or no seller. The rest of the time, they are buying and selling just like any other professional trader. If someone places a market order, they can to some extent dictate the price of that order based upon supply and demand. However the popular notion that market makers are "out to get the little guys" is inaccurate. The reality is that most retail traders aka "the little guys" trade in 100-500 share lots. It would be impractical for the market maker to chase such small orders because there would be no profit in it for them. However there is also something far more important that has happened to the stock market and the market makers role in the past few years.
Nowadays most stock orders are routed and executed automatically. It is estimated that about 80% of all transactions are fully automated. These orders originate from many different venues, exchanges, Alternative Trading Systems, ECNs, and foreign markets. This means that your order is matched with the opposite required order to fill but not by a floor trader for a market maker as was the case in the past, but with a computer program that matches up the orders and fills them automatically. Sometimes new beginner investors and traders place stop losses incorrectly and are taken out of the trade, and mistakenly think this may have been done by the market maker. There are hundreds of millions of shares traded each day, and there are billions of orders placed every day. One 100 share lot order is lost in such volumes.
If you are taken out of a trade due to an incorrect placement of a stop loss, it was due to the millions of other traders who are trying to buy or sell that stock. You are for the most part totally unaware of those millions of other traders. It may also be that you are using a retail online broker that fills your order out of their inventory of stock. This occurs frequently with small lot orders placed with brokers that offer extremely low execution fees, and make up the difference with slippage on the spread.
Another factor that is relatively new to the markets is the High Frequency Trading Firms. These are fully computerized orders that are triggered automatically by an algorithm computer program. These computer based triggers can fire off 60,000 orders each minute. You need to be aware of what triggers the HFTs so that you can either avoid them, or enter ahead of their millisecond trading. By SEC law retail investors and retail traders are not allowed to trade on the millisecond, only on the one minute. This may seem unfair, but it is designed to protect you from extreme speculative trading activity.
Another new trading platform is the Dark Pool, with actually a form of it in existence since the giant pension funds were allowed to invest in stocks. A Dark Pool is a venue where giant lot orders are transactions. Huge institutions buying millions of shares of stock do not want to have HFTs disturbing price as they buy in incrementally over many weeks time. This massive buying can distort the balance between buyers and sellers if it is not done carefully and properly. Be aware of where, when, and how Dark Pool investors buy and sell.
Periodically there is an imbalance between buyers and sellers. When one side overwhelms the market with orders then the market maker as is his duty, steps in to "make the market" and either sells stock out of his own inventory or buys stock that is offered for sale. When this occurs, price can move suddenly and in the opposite direction than you expected. That is why you end up on the wrong side of the trade.
Often a trader rushes training on the simulator with paper trading. Take your time until you reach a 75-80% success rate using the simulator before going live in the market. Learn the different market conditions and correct stop loss placement for your trading style.
