Understanding Market Makers Versus Market Takers in Trading

TL;DR Every exchange involves two types of participants: market makers who place orders waiting to be fulfilled (like setting a limit order to sell Bitcoin at $15,000), and market takers who execute immediate trades at current market prices. Makers provide liquidity by keeping the market accessible; takers consume it by filling existing orders. The distinction between maker vs taker roles is fundamental to how trading platforms operate and how fees are structured.

Why This Distinction Matters

Any trading platform—whether crypto, stocks, or forex—connects buyers with sellers. Without this system, traders would resort to social media to find counterparties, hoping someone wants to swap their Bitcoin for Ethereum. Understanding the maker vs taker dynamic is crucial because it determines your fee structure, execution speed, and role in the market. Most active traders shift between both roles throughout their trading sessions.

The Foundation: What Is Market Liquidity?

Before grasping the maker versus taker distinction, we need to understand liquidity—how easily an asset can be converted to cash at a reasonable price. Gold bullion is highly liquid; a massive bronze statue of a crypto CEO, not so much. The same concept applies to market liquidity, which refers to how readily you can buy or sell assets at fair market values.

In a liquid market, there’s substantial supply and demand. Buyers and sellers reach equilibrium quickly, meaning the lowest asking price aligns closely with the highest bidding price. The gap between these—the bid-ask spread—remains tight.

An illiquid market shows the opposite. Sellers struggle to offload assets at fair prices due to weak demand, resulting in wide bid-ask spreads. This is where the role of market participants becomes essential.

Deconstructing Maker vs Taker: How They Operate

Market Makers: Order Book Contributors

Market makers place orders into the order book—the central list of all buy and sell intentions on an exchange. For instance, you might enter: Purchase 1,000 Ethereum at $2,500. This order waits in the book until the market price reaches your target.

By submitting such orders, you’re “making” the market. You’re similar to a vendor stocking inventory in a retail store. Larger traders and institutions (especially high-frequency trading firms) frequently adopt the maker role. Smaller traders can too, particularly by using limit orders or selecting “Post Only” options to ensure the order enters the book before execution.

The critical point: not all limit orders guarantee maker status. To lock in maker treatment, explicitly select “Post Only” when submitting (available on web and desktop platforms).

Market Takers: Liquidity Consumers

The taker is the customer purchasing that inventory. Instead of waiting for prices to shift, takers use market orders—instructions to buy or sell immediately at prevailing market prices. This instantly fills existing orders from the order book.

Every time you’ve executed a market order on a cryptocurrency exchange, you’ve acted as a taker. However, limit orders can also result in taker status if your order fills someone else’s existing order.

The distinction is straightforward: you’re a taker whenever you fill another trader’s order, consuming the liquidity they provided.

The Fee Implications: Maker vs Taker Economics

Exchanges monetize trading through transaction fees, and the fee structure often reflects the maker vs taker difference.

Makers typically receive fee discounts or rebates because they inject liquidity into the platform. Higher liquidity attracts traders—they’re drawn to venues where orders execute smoothly. This benefits the exchange and its overall ecosystem.

Takers generally face higher fees since they utilize (rather than provide) liquidity. Different platforms implement varying fee schedules; some offer tiered structures based on trading volume and account status.

Bringing It Together

The maker vs taker framework is foundational to modern trading. Makers create orders and wait; takers fill those orders immediately. The essential insight: market makers are liquidity providers. Without their orders populating the book, markets would lack depth and efficiency.

Exchanges that embrace a maker-taker fee model incentivize makers through reduced costs, ensuring platforms remain attractive trading destinations. Takers benefit from this liquidity but pay the convenience premium. Both roles are vital—one supplies the market, the other demands from it.