The maker/taker trading mechanism encourages users to place limit orders in advance. Its purpose is to improve market liquidity, stimulate trading activity, and help maintain price stability.
This mechanism incentivizes users to place orders in advance, enhancing market depth and creating a better trading environment for all traders.
Maker (the one who places orders)
A maker order is not filled immediately but is instead placed in the order book as a limit order, waiting to be matched by other traders.
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For example, placing a buy order below the market price or a sell order above the market price.
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A maker order provides liquidity to the market, which is why makers are referred to as liquidity providers.
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Makers usually benefit from a lower trading fee or trading fee rebates.
Taker (the one who matches orders)
A taker order is filled immediately by matching with an existing order in the order book.
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For example, placing a buy or sell order at market price, or placing a limit order that matches with an existing order that will be filled immediately.
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Taker orders consume market liquidity, which is why takers are referred to as liquidity takers.
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Takers usually have to pay a relatively higher trading fee.