Speaking of Maker and Taker, the experienced traders that have been in the market for many years may be able to distinguish the concept, but they can still find situations where they are charged for fees when they shouldn’t.
How can we distinguish Maker and Taker? Some people say that the former is a liquidity provider and the latter is a liquidity extractor. The theory is very ideal, but hard to be applied to every single practical case.
What are Makers and Takers?
Unlike other investment markets, contract transaction fees are charged for two different states-Taker fee (or active transaction) and Maker fees (passive transaction, sometimes reimbursement). What does this mean?
The Maker is the market depth provider. If you place an order where the price is either higher or lower, it cannot be filled with the existing orders. The order will be then added to the order book, providing market depth.
The Taker on the other hand, is the market participant that takes away market depth. If your order and the existing order are filled immediately, then your order will "take away" the current market depth.
Whether it is a taker or a maker depends on the status of the trading action
Whether it’s a Taker or a Maker is not judged according to what you anticipate or set your order to but the state of the actual trading.
For example, a trader wants to place a limit order with the opening price of the BTCUSDT at 10313. However, the highest price is 10315 USD, and the closing price of the user is 10310 USD. Even though by placing a limit order, the trader potentially intends to be a maker, the order he places will be directly filled in the current order book. In this way, the trader fails to be a maker who provides liquidity. On the contrary, he takes the liquidity away.
Under the following three scenarios, Takers and Makers are more clearly defined
In contract trading market, orders are classified into market price and limit price. The market price is an order to trade immediately at the current market price. The limit price market refers to the orders that must be executed at the limited price or the best price possible within the limit range. Therefore, when you place a limit order, the price you entered actually represents a price range.
It is easy to tell that all market orders are Taker order.
In the case of a limit price order, if the limit order you placed cannot be filled immediately with the existing order, the order will enter the depth and wait for the trading. In this way, the trader is a Maker.
It should be noted that due to the rapid changes in the market, especially when the market rises or falls sharply, investors' trading sentiment is high, and a large number of orders will be generated in the order book. Therefore, the user's order status may change.
That is, when the limit order is placed, there is no matching order in the depth area. At this time, your identity is a Maker. But when the limit order can be filled at the limited price or the best price available within the price range, the trader’s identity will be converted from Maker to Taker.