[MUSIC] In this video, we will discuss the idea of limit price placement. That is, where does the limit price of your order lie relative to the best quotes? This leads to the idea of order aggressiveness. We will also introduce the idea of liquidity demanding and liquidity supplying orders. For this video, let's assume, unless noted otherwise, that the best ask is at $40 for 150 shares and the best bid is at $39.95 for 235 shares. And all this aggressiveness depends on how far its limit price is from the best quotes. Market orders are the most aggressive orders, as they have no limit prices. Alternatively, you could consider market orders to sell as limit orders to sell with a limit price of zero. And market orders to buy as limit orders to buy with the limit price of infinity. Limit orders that fill completely, almost instantaneously, are also extremely aggressive. These are what we call the earliest market of limit orders, examples of such orders are when buy orders have a limit price greater than or equal to the best ask price. And sell orders have a limit price less than or equal to the best bid price. With our best quotes of $40.00 and $39.95, an extremely aggressive sell order would have a limit price well below $39.95, and an extremely aggressive buy order would have a limit price way above $40. The lower the limit price of a sell order relative to the best bid price, the more aggressive it is. Similarly, the greater the limit price of a buy order relative to the best ask price, the more aggressive it is. For a given number of shares, a sell order with a limit price of $39.25 is far more aggressive than one with a limit price of $39.50. On the other side, a buy order with a limit price of 40.40 is far more aggressive than one with a limit price of 40.20. Limit orders that fill only partially when submitted, are less aggressive and can be considered as the third most aggressive set of orders. An example would be to send a sell order for 500 shares with a limit price of $39.95. I will let you verify that it will not execute completely. Similarly, a buy order for 220 shares at a limit price of $40, will also not execute completely. We will again let you verify this and understand what happens to the best quotes in both cases. Next, there are orders that simply improve the best quote without any execution. They form the fourth-most aggressive set of orders. They to our best quote of 40 and 39.95. This would mean for example, submitting a limit order to sell at 39.99 or submitting a limit order to buy at 39.97. These do not result in any executions, but simply narrow the bid ask spread. The next most aggressive set of orders are those that simply add more shares at the best bid or ask prices, without ordering the best quote in anywhere or any executions. An example would be to submit a buy order for 50 shares with the limit price of 39.95. This would simply increase the debt that the best price by 50 shares to 275 shares. Similarly, submitting a sell order for 100 shares with a limit price of 40, would increase the debt at the best ask price to 250 shares without ordering the best asked price. And finally, there are those orders that add additional depth at prices worse than the best quotes. An example of this would be to submit a buy order for 500 shares at a price of 39.90. This will go sit in the book behind the best bid and await execution. Orders that result in at least partial executions at the time of submission, are typically considered to be orders that consume or demand liquidity. They trade against orders that await execution in the order book. Those that sit on the order book, awaiting execution are considered to supply or provide liquidity to the market. In the last few videos, we've seen how the order book changes dynamically, as some orders await execution while others execute immediately. In this video, we understood the idea of order aggressiveness. Next time, we will look at some other common types of orders and order instructions. [MUSIC]