Passive and aggressive orders

Two roles, never one

A resting limit order is passive: it offers a price and waits. A market order is aggressive: it accepts a price that is already there.

Every single trade is one of each. A passive seller needs an aggressive buyer to lift their offer; a passive buyer needs an aggressive seller to hit their bid. Nothing trades because two people agreed in the abstract — it trades because one of them stopped waiting.

Notice what this makes of the two sides. The passive orders are the supply of opportunity: they are what exists to be traded against. The aggressive orders are the demand for immediacy: they are what consumes it. Price moves when the second exhausts the first at a level, which is the whole of the sentence «price moves when market orders absorb limit orders».

What each one costs

Being aggressive

You pay the spread, every time, and you get in. In a thin book you pay more than the spread, because your order walks up through several levels to find enough size.

Being passive

You save the spread and join a queue. You may not be filled — and there is a second cost, less obvious and more expensive, in the next section.

The uncomfortable half of waiting

Sitting passively looks free. It is not, and the reason is worth understanding properly because it explains a frustration almost every trader has and few can name.

Your passive order fills most reliably when price is about to keep going through it, and fails to fill exactly when the level was about to hold.

Both halves come from the queue. For price to reach the back of the queue — where you are — enough has to trade at that level to work through everyone ahead of you. That happens when there is real, sustained pressure, which is another way of saying: when the level is failing.

And when the level holds, price touches it, the orders in front absorb what came, and it leaves without ever reaching you. That is the same mechanism the article on simulation used, seen from the other end: the fills you get and the fills you miss are not a random sample.

How the market records which was which

This is the part that everything later depends on, and the part where a small inaccuracy turns into a large misreading two stages from now.

When a trade prints, the platform decides whether it was aggressive buying or aggressive selling by looking at where it printed:

The caveat is small and it matters: trades that print between the two prices, trades in an opening or closing auction, and anything where the book moved in the same instant can be ambiguous. Platforms resolve those differently, which is one of the reasons two screens can show slightly different numbers for the same minute and neither is broken.

Stops are aggression waiting to happen

One consequence, and it ties the last two stages together.

A stop order is passive while it waits and becomes aggressive the moment it triggers. So a cluster of stops sitting above an obvious high is not a wall of opinion — it is a battery of market orders with a shared trigger.

That is the exact mechanism behind the shape described in the chart patterns article: price reaches the level, the stops fire, a burst of aggressive buying arrives that nobody chose to send, and whether price continues depends entirely on whether enough passive sellers were waiting up there to absorb it. The shape was the symptom. This is the event.

That is stage 4

Three articles about the moment of the trade itself: how a price is made, what your platform will actually do when you press the button, and who was on each side of it.

From here the path splits in two directions and both come back together later. The next stage zooms out to the session — the hours of the day and what each one is for. After that comes the map of levels, and only then the instruments that read this article's one distinction in detail.

If you take one sentence forward, take this one: somebody crossed, and something on the other side either held or ran out. Everything else is measurement.