All trading can be divided into three major categories: dealing (market making), proprietary trading, and agency trading. It is from there that you can ask where there are differences between types of trading.
In the most direct terms: an agency trader executes orders on behalf of customers; a proprietary trader speculates for his or her firms' account(s).
The most specific, or noteworthy, feature of the dealer (as opposed to the proprietary trader) is his presence on both sides of the market to both add and take liquidity at such points as he deems such as opportune, based upon the activity in the stock, his inventory positions, incoming retail orders (if he has them), etc. In this way, the dealer not only maintains inventory, scaling into and out of positions, but assumes risk and provides liquidity on both a principal and agency basis.
I don't see where the "inherent" contradiction lies in the supposition that one may make a market and simultaneously profit. Revenue streams arise via mark-ups, commissions, the natural arbitrage opportunities afforded by virtue of the dealers' position on both sides of the market, the ability to short sell, and the valuation effects of a rising market on inventory positions..all of which make being a dealer - for those firms which have the skillful personnel, relationships, and brokerage economies of scale - a profitable business.
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