Maker vs Taker

Maker vs Taker

On every exchange, trades are classified as either “maker” or “taker” transactions. This classification determines what fees you pay and plays an important role in the economics of grid trading.

Who is a Maker?

A maker is a trader who adds liquidity to the order book by placing a limit order that does not immediately match with an existing order. The order sits on the book, “making” the market, until another trader comes along and fills it.

You are a maker when:

• You place a limit buy order below the current market price.
• You place a limit sell order above the current market price.
• Your order rests on the order book waiting to be filled.

Makers are valued by exchanges because they provide liquidity, which makes the market function smoothly. Without makers, there would be no orders for other traders to execute against.

Who is a Taker?

A taker is a trader who removes liquidity from the order book by placing an order that immediately matches with an existing order. Market orders are always taker orders. Limit orders can also be taker orders if they are priced to execute immediately.

You are a taker when:

• You place a market order (buy or sell).
• You place a limit buy order at or above the current ask price.
• You place a limit sell order at or below the current bid price.
• Your order is filled immediately against existing orders on the book.

Takers consume the liquidity that makers provide. While essential for price discovery and market activity, they reduce the depth of the order book.

Fee Differences

Most exchanges charge different fees for makers and takers, with makers receiving a discount. Here is a typical fee structure:

Some exchanges even offer negative maker fees, meaning they pay you to place limit orders. This rebate model incentivizes liquidity provision.

The fee difference might seem small on a single trade, but it compounds significantly when you execute hundreds or thousands of trades, as a grid bot does.

Example calculation:

A grid bot executes 50 round-trip trades per day, each worth $100:

• As a taker at 0.05% fee: 50 x 2 x $100 x 0.05% = $5.00 per day in fees.
• As a maker at 0.02% fee: 50 x 2 x $100 x 0.02% = $2.00 per day in fees.
• Savings: $3.00 per day, or $90 per month.

With negative maker fees (-0.01%), you would earn $1.00 per day instead of paying.

Why Grid Bots Are Natural Makers

Grid bots are inherently maker-friendly because of how they operate:

1. Buy orders are placed as limit orders at prices below the current market. These orders sit on the bid side of the order book until the price drops to their level. This is pure maker behavior.

2. Take-profit orders are placed as limit sell orders above the entry price. They sit on the ask side until the price rises to their level. Again, pure maker behavior.

3. The bot waits for the price to come to it, rather than chasing the current price. This patience is the essence of market making.

Because virtually all grid bot orders are limit orders that rest on the book, grid bots almost exclusively pay maker fees. This structural advantage means lower trading costs and higher net profitability compared to strategies that rely on market orders.

How to Ensure Maker Status

To make sure your orders are always classified as maker orders:

• Use limit orders instead of market orders.
• Place buy orders below the current market price.
• Place sell orders above the current market price.
• Use post-only order type if available, which rejects orders that would cross the spread and execute as taker.

Grid bots handle this automatically. Every buy order is placed at a grid level below the current price, and every take-profit is placed at the next grid level up.

Summary

• Makers add liquidity by placing orders that rest on the order book, while takers remove liquidity by matching against existing orders.
• Maker fees are significantly lower than taker fees, and some exchanges even pay rebates for maker orders, making fee structure a major factor in profitability.
• Grid bots are natural market makers because all their orders are limit orders placed away from the current price, ensuring they consistently pay the lowest possible fees.

Next Step

Let us learn about one of the most important risk management tools: What is Stop Loss?