When trading cryptocurrency on an exchange, choosing the right order type is just as important as choosing the right asset. Order types define how your trade is executed, influencing your entry price, execution speed, fees, and overall risk.
Understanding Market Orders, Limit Orders, and the Maker–Taker model allows traders to execute more efficiently, avoid common mistakes, and trade with greater confidence. This guide breaks down these concepts in a clear, practical way.
What Is an Order Type?
An order type is an instruction you give to an exchange on how to buy or sell a cryptocurrency. Instead of simply deciding what to trade, order types help you control when, at what price, and under what conditions the trade is executed.
The two most commonly used order types are:
Market Orders
Limit Orders
Market Orders
A Market Order instructs the exchange to execute your trade immediately at the best available price. Speed and certainty of execution are prioritized over price precision.
How Market Orders Work
When a market order is placed, the exchange matches it with existing orders in the order book:
A buy market order fills at the lowest available ask price.
A sell market order fills at the highest available bid price.
Execution is nearly instant, provided sufficient liquidity exists.
Placing Market Orders: Amount vs. Total
Most exchanges allow two methods:
By Total: Specify how much quote currency (e.g., USDT) you want to spend or receive.
By Amount: Specify the exact quantity of the base asset (e.g., BTC or ETH).
The exchange calculates the corresponding value automatically based on current prices.
Example
If Bitcoin is trading around $30,000 and a trader places a market buy for 0.1 BTC, the order fills immediately at the best available price, assuming sufficient liquidity.
Advantages
Immediate execution
Simple and beginner-friendly
Ideal for fast-moving markets
Disadvantages
No control over execution price
Exposure to slippage in volatile or illiquid markets
Typically higher fees due to taker status
Limit Orders
A Limit Order allows traders to define the exact price at which they are willing to buy or sell. The trade only executes if the market reaches that price or better.
How Limit Orders Work
Buy Limit: Sets the maximum price you are willing to pay.
Sell Limit: Sets the minimum price you are willing to accept.
The order is placed on the order book and waits until the market reaches the specified price.
Example
If ETH is trading at $2,000 and a trader places a buy limit at $1,900, the order executes only if the price drops to $1,900 or below. If the price never reaches that level, the order remains unfilled.
Advantages
Full price control
Protection against slippage
Potentially lower fees if executed as a maker
Useful for planned entries and exits
Disadvantages
No guarantee of execution
Orders may remain unfilled
Partial fills can occur in low-liquidity conditions
Maker vs. Taker: Understanding Liquidity Roles
Every trade involves two sides:
One trader adds liquidity
One trader removes liquidity
This determines whether the trader is classified as a maker or a taker.
Makers (Liquidity Providers)
A maker places an order that does not execute immediately and rests on the order book. These orders add depth and liquidity to the market.
Common example:
A limit buy below the current price
A limit sell above the current price
Takers (Liquidity Consumers)
A taker places an order that executes immediately by matching an existing order on the book.
Common examples:
Market orders
Aggressive limit orders that cross the current price
Even a limit order can act as a taker if it fills instantly.
Why Maker vs. Taker Matters
The distinction affects:
Trading fees
Market efficiency
Execution behavior
In every completed trade, there is always:
One maker (resting order)
One taker (incoming order)
This classification has nothing to do with professional market-making firms—it applies equally to retail traders.
Maker–Taker Fee Structure
Most crypto exchanges use a maker–taker fee model:
Makers pay lower fees
Takers pay higher fees
Why Exchanges Do This
Encourages deeper order books
Improves liquidity and tighter spreads
Creates a more stable trading environment
By rewarding liquidity providers, exchanges incentivize traders to use limit orders and contribute to market depth.
Conclusion
Market and limit orders serve different purposes:
Market orders prioritize speed and certainty.
Limit orders prioritize price control and efficiency.
Understanding the maker–taker model helps traders manage fees and choose the most cost-effective execution strategy. By applying the right order type in the right situation, traders can improve execution quality, reduce unnecessary costs, and trade crypto with greater discipline and confidence.