Takers and Makers — Who They Are and How They Work on the Exchange

Who Are Takers and Makers in Simple Terms?

A maker is a trader who submits a limit order to buy or sell cryptocurrency and waits for it to be executed, thereby forming offers on the trading platform. A taker is someone who instantly executes a trade at the current price using existing orders.

How Is the Role of a Participant in a Trade Formed?

The same user can play different roles in different transactions. The choice of maker/taker is made depending on the trading goal, market conditions, and position size. 

The role of maker is chosen by traders who prioritize price and are willing to wait for the right quotes. Takers are participants for whom the speed of the transaction is more important than the ideal rate (in a rapidly changing market, for short-term transactions or P2P exchange).

Market Makers and Their Role in Trading

Thanks to makers, there are always offers at different prices on the exchange, and transactions are executed without long waits.

Market Takers and Their Behavior in the Market

Takers are considered the drivers of the market. They execute makers' orders, support turnover, and, together with them, form continuous trading. 

What is Liquidity and Why is it Important?

Liquidity is the ability of an asset to be bought and sold quickly without sharp changes in price. The more orders there are in the depth of market and the higher the trading volume, the higher its indicator. In this case, trading on the exchange is stable and convenient for participants. If there is little liquidity, even a small transaction can significantly shift the price.

Maker and Takers: Key Differences

The main difference between the roles lies in the way trading operations are carried out. A maker is willing to wait for their order to be executed, while a taker, on the contrary, immediately executes a transaction at the current price. As a result, some participants generate liquidity, while others take it away.

This leads to other differences:

• Maker trades are not executed instantly but are usually accompanied by lower commissions and minimal slippage risk.
• Takers act quickly, receive immediate execution, but often pay higher commissions and may face price changes during high volatility.

The Roles of Takers and Makers in Different Markets

In the traditional currency market, large banks are usually the main makers. They maintain liquidity, and the difference between the buy and sell prices is minimal. Private traders who conduct currency transactions in such conditions more often play the role of takers.

The cryptocurrency market is simpler and more accessible. Here, any user can become a maker by placing a limit order. Exchanges encourage this with reduced commissions, so the roles of maker and taker are freely interchangeable and accessible even to beginners.

How Do Commissions for Makers and Takers Differ?

The cost of a transaction on an exchange depends on the trader's role in the deal. For makers, it is cheaper because their actions increase market supply, and trading platforms encourage this. Takers who execute orders immediately and take away liquidity usually pay a higher commission. This approach motivates users to place limit orders more often and maintain active trading.

When Does a Transaction Apply to a Maker or Taker?

Let's look at an example:

Suppose you want to buy Bitcoin at a price lower than the current one. To do this, you need to place a limit order, after which it will appear in the exchange order book. When someone wants to sell assets at your price later and the order is executed, the trade will remain a maker trade for you.

If you decide to buy Bitcoin immediately at the market price and execute the trade instantly using existing orders, you are a taker because you are taking liquidity from the order book.

Types of Orders on Crypto Exchanges and Their Impact on Commissions

The order you choose determines whether you will be a maker or a taker, and therefore the cost of your trades.

Market and limit orders

A limit order allows you to specify the purchase or sale price in advance. Such an order is not executed immediately but goes into the order book and waits for a counteroffer. In this case, you add liquidity to the market and usually pay a lower maker commission.

A market order is executed instantly at the current price using existing orders. It is convenient when speed is important, but it applies to taker trades and is subject to a higher commission.

Stop orders and conditional orders

Stop orders are triggered only when a specified price is reached. After that, the exchange automatically places a market or limit order. Such orders are used to protect against losses or lock in profits.

Conditional orders help automate trading: a trade is opened or closed only when specified conditions are met. Depending on the type of execution, they can apply to both makers and takers, and the commission is calculated upon execution of the order.

Why Do Exchanges Use the Maker/Taker Model?

It is important for exchanges to always have buy and sell orders on the market. The maker and taker model solves this problem: it encourages those who place orders in advance and fill the order book with reduced commissions. At the same time, traders who value speed can execute trades immediately. As a result, the market remains active, prices are more stable, and trading is convenient for everyone.

Advantages of the Maker/Taker Commission Distribution Model

The Taker/Maker system helps exchanges maintain active and stable trading that is beneficial to all market participants. Advantages:

• Increased liquidity;
• Reduction in sharp price fluctuations;
• Continuous trading turnover;
• The ability to execute trades quickly;
• A universal option for active and passive strategies.

How Do Market Makers Trade?

Experienced market makers usually don't trade manually. They use special algorithm-based programs that constantly place orders at different prices. Their income comes from the small difference between the purchase and sale prices..

The Importance of Takers and Makers for the Exchange

A trading platform cannot operate with only one type of trader. Makers form the price field by setting benchmarks for the market. Takers turn these orders into real transactions, supporting price movement and trading volume. The interaction of both roles makes trading fast and predictable.

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