Understand the meaning of maker orders and taker orders to optimize trading costs

In trading environments, there are two order types that influence market dynamics: maker orders and taker orders. Understanding the meaning of these two order types is essential for building efficient trading strategies. It’s not just about “differences in order methods,” but about how each impacts the market and affects traders’ costs and profitability.

The Meaning of Maker and Taker: Understanding from Liquidity Relationships

In market trading, providers of liquidity and users of liquidity play different roles. The definitions of maker and taker orders are based on this flow of liquidity.

A taker order is an order that executes immediately against existing orders on the order book. If you want to quickly establish a position at the current market price, a taker order “takes” liquidity from the existing order book. Conversely, a maker order adds a new order to the order book and waits for it to be matched. In other words, makers “supply” liquidity to the market, and in return, they can enjoy preferential fee rates.

Why Taker Orders Are More Expensive: The Cost of Immediate Execution

The main feature of taker orders is their guaranteed immediate execution. Traders who prioritize this certainty and convenience tend to “consume” liquidity from the market, which results in higher trading fees.

Characteristics of Taker Orders:

• Executed immediately via market or limit orders
• Function as liquidity takers
• Enable quick position building and closing
• Suitable when rapid market response is needed
• Subject to taker fees, such as 0.055%

While this approach is optimal for traders prioritizing speed and certainty, over the long term, accumulating fees can become a cost burden.

Maker Order Fee Advantages: Rewards for Providing Liquidity

Maker orders contribute to market stability and liquidity by supplying new liquidity. As a reward for this contribution, traders placing maker orders benefit from lower trading fees compared to takers.

Advantages of Maker Orders:

• Place limit orders that contribute to supply and demand balance
• Help narrow bid-ask spreads
• Pay reduced maker fees, such as 0.02%
• Remain on the order book until filled
• Encourage a patient approach, reducing long-term costs

Adopting a maker strategy creates a fee advantage, and even with the same trading profit, it can significantly improve net gains over time.

Practical Example: Visualizing Cost Differences Between Maker and Taker

Let’s look at a concrete example to see how fees differ in practice.

Trading Scenario: BTCUSDT Perpetual Contract

• Contract size: 2 BTC
• Entry price: 60,000 USDT
• Exit price: 61,000 USDT
• Position: Long

Tanaka-san (using maker orders):

• Entry fee: 2 × 60,000 × 0.02% = 12 USDT
• Exit fee: 2 × 61,000 × 0.02% = 12.4 USDT
• Position profit (excluding fees): 2 × (61,000 - 60,000) = 2,000 USDT
• Final profit: 2,000 - 12 - 12.4 = 1,975.6 USDT

Sato-san (using taker orders):

• Entry fee: 2 × 60,000 × 0.055% = 66 USDT
• Exit fee: 2 × 61,000 × 0.055% = 67.1 USDT
• Position profit (excluding fees): 2,000 USDT
• Final profit: 2,000 - 66 - 67.1 = 1,866.9 USDT

Analysis: Both traders realize about 2,000 USDT profit, but the maker order strategy reduces fees by over 5%. Repeated trades will amplify this difference.

Strategies for Prioritizing Maker Orders

If you want to optimize trading costs, consider strategies that favor maker orders.

Three steps to successfully place maker orders:

1. Set Limit Orders Precisely

   • For buying: aim for a price below the current best bid
   • For selling: aim for a price above the current best ask
   • This ensures your order is added to the book and functions as liquidity supply

2. Use Post-Only Functionality

   • Enable post-only to prevent your limit order from executing immediately
   • If it would execute instantly, it is automatically canceled

3. Adjust Prices According to Market Conditions

   • Limit orders during high-volume periods are more likely to fill
   • During low volatility, waiting times for limit orders tend to be shorter

Note: If your limit order executes immediately, it will be treated as a taker order and canceled if post-only is enabled.

Summary: Leveraging Maker and Taker Orders in Your Strategy

Understanding the meaning of maker and taker orders is not just technical knowledge but a key to managing trading costs and maximizing profits. While taker orders are useful when speed and certainty are needed, a maker strategy can generate long-term efficiency in more relaxed trading scenarios.

By understanding fee structures and adjusting your approach accordingly, you can maximize your final profits from the same trading gains.