In this video, we are going to keep talking about order types and parameters. We looked at market orders in the previous video and saw how they behave when submitted. A total of 2 configurations exist for market orders and and both of them execute as takers. Since market orders have no specified price, there is now way for them to join the order book. When the matching engine receives an incoming market order, the engine matches it with existing orders on the book.
Limit orders equip us with a limit price parameter that we can use to create an order that will join the book as a maker. To actually join the book as a maker, limit orders are required. However, limit orders do not guarantee that we will be a maker. We call this condition necessary but not sufficient. To be a maker, it is necessary to be a limit order, but it is not sufficient.
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