1. Passive order
A passive order is actually a limit order.
Different from common limit orders, once the user place a limit order, the system will evaluate first to decide if the order will be filled as soon as it’s placed so as to get the liquidity of the market.
If that is the case, the limit order will be automatically canceled to prevent it from successfully placing. In terms of process steps, passive orders are no different from limit orders.
The difference lies in: the traders who placed a passive order will be seen as a maker and he cannot be a taker. As a maker, once the order is filled, he will get his commission fee accordingly.
Therefore, passive orders are made for traders who care for commision fees.
2. Example
Suppose a trader wishes to buy Bitcoin at $7,000, while the price of No. 1 seller is $6,999. If he placed a limit order, it will be filled immediately. In this case, he became a taker.
However, if he placed a passive order, it will be canceled. Only when the price of No. 1 seller is higher than $7,000 will the order be placed successfully.