Passive Limit Orders

Passive limit orders are instructions to buy or sell an asset at a specific price or better, which are placed into the order book and wait to be filled. Unlike market orders, these orders do not execute immediately; they provide liquidity to the market by allowing others to trade against them.

Market makers rely heavily on passive limit orders to maintain their positions and capture the spread. These orders are the foundation of market depth and help stabilize prices during periods of low volatility.

When a market taker executes a trade, they are essentially interacting with these passive orders. The management of these orders is a core skill in professional trading and algorithmic market making.