Aggressive and passive: who moves the price

In every trade there are two parties and no third: an aggressive party that rushed and paid the market price, and a passive party that waited with a limit order. Understanding this division is the key to all of order flow; price does not move except when the aggressors attack the passives’ liquidity.

The four types

• Aggressive buyer — buys at the offer (lifts the offer); pays higher because they are in a hurry. Coloured green.
• Aggressive seller — sells at the bid (hits the bid); accepts lower because they are in a hurry. Coloured red.
• Passive buyer — sits with a limit order at the bid and waits for an aggressor to sell to them. Often institutions building bottoms.
• Passive seller — sits with a limit order at the offer and waits for an aggressor to buy from them. Often institutions building tops.