About Lesson
Market orders are orders that you would expect to execute immediately. Essentially, they say at the current price, do x. Suppose you’re on Binance, you want to buy 3 BTC, and Bitcoin is trading at $15,000. You’re happy paying $45,000 for the coins and don’t want to wait for prices to drop lower, so you place a buy market order.
Who’s selling the coins, you ask? We need to look at the order book to figure that out. This is where the exchange keeps a big list of limit orders, which are simply orders that aren’t executed immediately. These might say something like at y price, do x.
For the sake of this example, another user might have placed an order earlier telling the exchange to sell 3 BTC when the price hits $15,000. So, when you place your market order, the exchange matches it with the book’s limit order.
Effectively, you haven’t created an order – instead, you’ve filled an existing one, removing it from the order book. This makes you a taker because you’ve taken some of the exchange’s liquidity away. The other user, however, is a maker because they’ve added to it. Typically, you enjoy lower fees as a maker, because you’re providing a benefit to the exchange.
The relationship between these two players is explored in more detail in Market Makers and Market Takers, Explained. Check it out if you want a better understanding of how exchanges work.