Marketers and portfolios are key members of trading markets; One as a provider of liquidity and the other as a consumer. In this article, we will explain these two basic roles.
Review:
Markets are made up of marketers and portfolios. Marketers are people who create buy or sell orders that are placed at a specific time and thus shape and control the overall market trend. This causes it to become liquid; This will make it easier for others to buy or sell Bitcoin immediately when the conditions are right. Those who buy or sell immediately and instantly are called portfolio managers.
Introduction:
In any type of exchange (whether Forex, stocks or cryptocurrencies), traders and buyers are compatible. Without these connections, you should advertise your bitcoin trading with Atrium on social media and hope that this can attract an audience.
In this article, we will discuss the concept of makers and takers. Every market participant as a trader falls into at least one of these categories. Makers and takers are the lifeblood of many trading platforms, and their presence (or absence) separates strong exchanges from weak ones.
Liquidity:
Before we can properly discuss makers and takers, it is necessary to talk about liquidity. When he talks about someone liquidating an asset, he is actually referring to the simplicity of selling that asset.
An ounce of gold is a very liquid asset because it can be easily traded for cash in a short period of time. In contrast, the ten-meter-tall statue of the CEO riding on a Bainance cow is unfortunately a completely non-liquid asset; Although this sculpture may create a beautiful view in the garden, in reality, it does not suit every taste.
Liquidity in the market, although slightly different, is very relevant to this end. A market with liquidity is a market in which you can easily buy or sell assets at a fair price. In general, it can be said that there is a lot of demand and supply for the asset in such a market.
Given this amount of activity, buyers and sellers will usually be in the middle of each other; That is, where the lowest selling order (or asking price) is almost at the same level as the highest buying order (or bid price). As a result, the difference between the highest bid and the lowest bid will be small (or small). However, this difference is called the bid-ask spread.
Conversely, a market without liquidity or with low liquidity does not show any of these characteristics. In such a market, when you are going to sell a stock, due to the lack of high demand, you will have trouble selling it at a reasonable price. As a result, cashless markets tend to have higher bid-ask spreads.
Market makers and market takers:
As mentioned, these traders, who are present in an exchange or exchange, act as market makers or portfolio takers.
Maker
Exchanges usually calculate the market value of an asset through the order book. Through this office, the exchange collects all the offers of its users. For example, you might offer an order like this: Buy 800 bitcoins for $ 4,000. Similarly, this order has been added to the office and will be filled when the price reaches $ 4,000.
Placing orders with certain limits, such as the order described, requires you to announce your decision sooner by adding them to the order book. In other words, since you "created" this market, you are a "market maker". This exchange also acts like a grocery store that hires people and pays them to put the goods on the shelves, and you are the one who puts your goods on the shelves.
For traders and large institutions (such as those specializing in high-frequency trading), acting as a marketer is a common occurrence. Alternatively, small traders can be considered as marketers simply by creating certain types of orders that are not executed immediately.
Takers
In the same store example, you certainly put your goods on the shelves for someone to come and buy. The person who buys your product is actually the taker, except that financially, instead of buying cans of beans from the store, they use the amount of cash you provide.
Think about it! You increase the liquidity of the exchange by placing an offer in the order book, as you make buying and selling easier for users. On the other hand, a portfolio manager removes part of that liquidity by placing an order in the market (the order in which trades are made at the current market price). They buy or sell assets at current market prices. When they do, the orders in the order office are immediately filled.
If you have ever placed a market order in cryptocurrencies, then you have acted as a portfolio manager. But note that you can also be a portfolio manager using limited orders. In fact, every time you fill out someone else's order, you become a portfolio manager.
Marketing / portfolio management fees:
Many exchanges earn a significant portion of their profits and income by receiving transaction fees to match buyers and sellers. This means that every time you create an order and then execute it, you pay a small fee. Of course, this amount is different in each exchange and also depends on the amount and type of your transactions.
In general, because marketers provide the cash they need to exchange, they are offered a discount. This will be great for business. In addition, such a platform would be more attractive than lower-liquidity platforms because it is easier to trade. In many cases, because portfolio operators do not provide the same liquidity as exchange operators, they will be required to pay higher fees than they do.
Conclusion:
In short, marketers are traders who create orders and wait for them to be filled, while portfolio managers are people who fill someone else's orders, and of course the main point here is that marketers provide the liquidity of exchanges.
For exchanges that use a market-portfolio model, marketers are critical to increasing the uptake of their platform as a trading platform. In general, money changers receive lower commissions as a reward for providing liquidity to marketers. Portfolio managers, on the other hand, use this liquidity to buy or sell assets easily, but at the same time, often charge higher fees for doing so.