In this video, let’s look at the next two limit order configurations. We are ready to move to the buy-buy and the sell-sell permutations. With these two configurations, we will see how makers come to be. Since the order side and the limit price are on the same side, these particular configurations allow the order to to join the order book.
We have been referring to these order configurations as permutations.
A permutation is a specific instance from a set of parameter value variations.
An example of this can be seen using a slot machine.
Each slot represents a parameter, and for each of these slots, there is a set of possible values.
By varying these values, we generate permutations.
For our limit order permutations, we have two slots. These slots represent our parameters, the side of the order and limit price location on the book. For both of these parameters, there are two possible values, buy and sell.
Permutations are useful when we want to consider all possible variations of some set of parameters and values. This is why we are using them here.