Aggressor

The traders who eliminate the liquidity from market by placing buy and sell orders on the current market rates are known as Aggressors.
Aggressors, besides placing orders also ask price or sell the current bid price in the current market.
The orders execution of the Aggressors takes place very quickly because, they purchase the available contracts at the current price of the market.
It means that aggressor leave behind other traders in terms of taking liquidity out of the market because they sell at lower and lower prices and buy at higher and higher prices.
On the other hand, passive traders cause more liquidity to the market as they place trades with bids and offers which may not be executable quickly.


What do aggressors do?


The aggressors make a review of the current rates in the market that has a range of orders at various prices.
They set a best order at best prices.
The difference between both prices will be dependent on the current situation of the market.
Market may also have different number of purchase and or sale.
For example, if the bid-ask spread for EUR/USD is 1M units at 1.1010 / 1.1012, an aggressor would immediately buy 1M units at the best asking price of 1.1012 or instantly sell 1M units at the best bid of 1.1010.
A passive traders receives a motivation to buy EUR/USD might offer a bit more, for example, 1.1011.
The major difference between passive trading trends and aggressive trading is that the passive trading increases liquidity in the market while aggressive trading eliminates the liquidity in the market.


How do Aggressor affect the market liquidity.


The order book is accessible to market participants, in which they can see the complete list of bids and offers and among them some may not be closely related to market price which is going on.
For example, the best available market price for EUR/USD is 1M units at 1.1010.
Other bids may “res”t below that price, such as 2M units for 1.1009 or 3M units at 1.1008.
Also, other ask offers may be above the best current asking price.
If the best offer is currently 1.1012, higher offerings might be 3M units for sale at 1.1013 or 2M units at 1.1014.
By taking immediate action at the current bid or asking price, aggressors continue to sell at lower and lower costs or buy at higher and higher prices.
This squeezing causes volatility, which will become more common as markets get thin and imbalanced as other traders are pushed out.

 

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