#OrderTypes101

Market order vs. limit orders

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.