You must have heard the term active trading and passive trading, especially those who are working in the forex world. In fact, many forex market players consider themselves to be traders, but they claim to be a passive trader or commonly known as Market Maker.
So what do the two terms mean, and where are the differences between the two? Check out the full review in this article.
Active Trading (Trader)
Traders are part of market participants who focus on transactions that have to do with sentiments and market conditions at the time. A trader usually does short-term trading with a much greater frequency.
Based on Investopedia, traders generally have a variety ofclear methods, strategies and trading plans because they may not want to hold trading positions for too long.
In carrying out active trading activities, traders usually use influential elements such as Stop Loss, target profit, and certain leverage that can control both losses and profits. Active traders, both beginners, and professionals, naturally use intermediaries to carry out every transaction they make. This intermediary, who else if not a broker or a particular trading platform.
Passive Trading (Market Maker)
Passive trading or Market Maker is one of the many market participants who trade. The examples of well-known Market Makers include brokers, banks, hedge funds, and even central banks. Market makers aim to provide liquidity on currency transactions.
They will hold orders and execute based on the current bid / ask price in the market. In short, when someone opens a buy transaction, Market Maker will place a sell position. They will ensure that all orders in the market are well executed.