Aggressors are traders who extract liquidity from the market by placing buy and sell orders at prevailing market prices. Instead of using limit orders, aggressors opt to buy at the current market ask price or sell at the current bid price. Their purchases of available contracts at the market price result in immediate order execution.

This prompt action leads aggressors to sell at progressively lower prices and buy at increasingly higher prices, effectively driving other traders out and removing liquidity from the market. In contrast, passive traders contribute liquidity by submitting bids and offers that may not be filled or executed right away.

Aggressors analyze pricing in a market that features a variety of orders at different price points. The best bid and best offer prices establish the bid-ask spread, with the difference between these prices fluctuating based on current market conditions. The availability of contracts for buying or selling can also vary.

For instance, if the bid-ask spread for EUR/USD is 1M units at 1.1010 / 1.1012, an aggressor would quickly buy 1M units at the best asking price of 1.1012 or sell 1M units at the best bid of 1.1010. A passive trader looking to buy EUR/USD might place a slightly higher offer, such as 1.1011. Passive trading generally narrows spreads and adds liquidity to markets, while aggressive trading tends to remove liquidity.

Market participants can access the order book, which displays a list of all current bids and offers, some of which may not be near the current market price. In our example, the best available market price for EUR/USD is 1M units at 1.1010. Other bids may be positioned below that price, such as 2M units at 1.1009 or 3M units at 1.1008. Similarly, other asks may exist above the best current asking price. If the best offer is 1.1012, higher offers might include 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 prices or buy at higher prices. This pressure creates volatility, which becomes more pronounced as markets thin out and become imbalanced, pushing other traders out.