Crypto trading fees can be confusing. Exchanges differentiate between maker and taker fees, which differ significantly. What are maker and taker fees and which trades qualify into which of the two categories? Understanding maker vs. taker fees in Spot trading and Futures trading can save you a majority of your trading fees.
Looking at the fee schedule of your cryptocurrency exchange, you most likely saw that the fee level for maker vs. taker trades are quite different. Nearly all major exchanges differentiate between maker and taker fees, with maker fees being significantly lower than taker fees. In some cases, maker fees can even be negative, rewarding the trader a small amount of the trade size.
Trade execution as maker or taker describes whether you are making liquidity for the market or whether you are taking liquidity from the market. For a trade to be executed, there needs to be a market maker and a market taker.
As a maker, you are giving liquidity to the market by specifying that you would buy or sell a certain amount of the asset for a specified price. The position is not immediately executed, only when someone else is willing to trade with you at that price level. In a way, as a maker you are enabling other traders to immediately execute their trades as a taker, as they can choose to buy or sell you the asset at your specified price.
This also explains already why the exchange usually charges you less fees in case you act as a market maker. You are enabling other traders to immediately execute their trades. You are adding liquidity to the market which it requires to properly function.
On the other hand, the exchange charges you a higher fee in case you are taking liquidity from the market by directly executing your order. In order to see the current limit orders in a market, you will have to look into the order book.
What order types qualify as maker vs. taker?
So what kind of orders qualify as a taker vs. a maker trade? Simply put, a limit order qualifies you as a maker, while a market order creates a taker trade.
In a market order, the trader specifies an amount of a certain asset he or she would be willing to buy or sell at a certain price. For example, if the price of Bitcoin right now is at 20,000 USD, and you would want to buy one BTC at the price of 19,900 USD, you would place a limit order. In case the market price of Bitcoin lowers to your specified 19,900 USD and someone performs a market order to sell their Bitcoin, it will be matched with your limit order and the trade is executed. You will pay the maker fee while the person that set the market order pays the taker fee. This is of course a simplified example, as there could be partial executions, etc and your trade might be filled by multiple different traders.
As you can see, an executed limit order requires other parties to fill that order, while a market order forces the buy or sell of the asset at the best available prices.
“At the best available price” - this explains why it is so important for exchanges to have deep liquidity. Let’s go back to the example: Let’s say the price of Bitcoin is at 20,000 USD, and someone wants to market sell their 10 BTC. There might a couple of limit order in the market which can be used to execute that market order. The fewer limit orders there are in the market close to the current price, the worse the price gets for the person that market sells their 10 BTC. To attract large traders, the exchange needs to ensure sufficient liquidity (mostly seen as the 2% market depth). Limit orders give liquidity, hence the exchange usually charges less fees for those.
What about other order types?
You may see many types of different orders in your cryptocurrency exchange interface, such as stop-limit, stop-market, take profit, stop loss, trigger orders, etc.. In general, if your order market executed, you will have to pay the taker fee, while a limit execution qualifies you for the maker fee. Take profit and stop loss orders fall into the same categories. Coming back to our example, you bought that one BTC at 19,900 USD. If you set a limit order to sell your one BTC at the price of 21,000 USD, you will qualify for the maker fee. If you set a trigger price at 21,000 USD to market sell your one BTC, you will have to pay the taker fees. There is many more variations, however understanding the general concept is the main purpose of this article and is also the most important part for new traders in the crypto space to understand. More detailed explanations will follow in later articles.
Save >60% of your trading fees by choosing the right order type
At FTX you pay more than 70% less for maker orders vs. taker orders (even more if staking FTT) for both spot and futures, at Bybit more than 80% less for future trades, KuCoin, Binance, etc. all have similar discounted maker fees for futures trading (as of the date of writing). The difference in trading fees can result in many thousand US Dollars in case of more active traders. Hence, why not executing most of the trades as maker vs. as taker?
For many trading styles, choosing a limit order vs. a market order does not contradict any of their trading principles, it may just be a matter of convenience or standard behavior. In fact, moving from other asset classes to crypto trading, there may have not been any differentiation in fees beforehand (e.g. in Forex trading). Moreover, a limit order gives the trader more control over the position and its entry price, while a market order may result worse execution prices as expected.
There are trading strategies, that do require market orders. For example, a high execution speed requirement for scalpers may require it.
Your exchange choice should mirror your trading style
As outlined above, there are exchanges that have significantly reduced maker fees vs. taker fees. However, there are exchanges with similar fee rates for both order types depending on the tier level the trader is classified in (e.g. Binance Spot lower tier). To further optimize your fee levels, it is worthwhile to consider your trading style (% of order as maker vs. taker) and the fee levels at the different kind of cryptocurrency exchanges. Matching your trading style with the exchange can optimize your fee levels even further.
If you do not want to manually compare all different tier levels, you can choose to use our dr-fee analysis engine to find your most fee efficient exchange. The dr-fee engine analyses how much of your volume was traded as maker vs. taker, and shows you how much you would have paid in fees for the exact same at the major crypto exchanges.