When Not to Trade in Market Making Interviews
When not to trade in market making interviews, including uncertainty, risk limits, negative edge, missing information, and communication.
Candidates who overtrade during games.
No trade can be a decision
If the game allows declining, widening, or reducing size, not trading can be rational when the expected edge is poor or risk is too high.
Uncertainty can dominate
When you cannot estimate fair value within a useful range, a very tight quote is hard to defend.
Concrete example
If your fair value range is 40 to 80 and the counterparty wants a large fixed-size trade at 60, the uncertainty may justify declining or quoting very wide.
Risk limits can force restraint
Near a position or loss limit, another trade may be unacceptable even if it has modest positive expected value.
Communicate the reason
Do not just say no. Explain whether the issue is uncertainty, risk limit, negative edge, or missing information.
Common mistakes
Candidates often feel every prompt requires a trade. Market making also tests knowing when the quote should be wider or smaller.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.