Creating a Limit Order
Last updated
Last updated
A Limit Order is a quote to buy or sell a certain amount of an asset for a specified price. Unlike a Market Order, which will automatically fill instantly at the best price offered by the order book, a Limit Order will rest on the order book until it can be matched with another trader. Limit Orders can be used in a number of different ways:
To only buy or sell at the price you specify: You may wish to purchase BTC, but only if the price drops by $1,000. To do this, you would place a Buy order for the price and amount you wish to purchase, and it will only execute if your parameters are met.
Stop Loss/Take Profit: If you have an open position in a market, you may wish to close the position if the Mark Price is approaching your liquidation price. This is known as a Stop Loss, and will prevent you from being liquidated. Alternatively, if you have a position with positive PnL, you may wish to start taking profit when certain milestones are met to lock in that profit. Both of these things can be done with Limit Orders.
Market Making: Order Book-based exchanges depend upon market makers to place quotes to buy and sell assets at prices near the Index Price. They do this by constantly placing, cancelling, and replacing bids and asks which form the liquidity which allows the market to run efficiently. This is all done with Limit Orders.
To place a Limit Order, you must set aside the collateral which will be required should the order be filled. This is to ensure that all of the quotes on the order book are viable to fill taker orders at any given time. The process of placing a Limit Order is very similar to that of a Market Order, with a few additional options, which we will review here.
Set your desired leverage
As with Market Orders, the first step is to specify how much leverage you would like for your position. The higher the leverage you choose, the less collateral you will have to set aside to place your Limit Order. However, your Liquidation Price will also be closer to your Limit Price.
Choose Buy or Sell, and select Limit as the order type.
Specify your Limit Price. This is the price at which you wish for your order to execute at, and your order will not fill until a bid or ask can be matched to it, either partially or fully.
Specify the size of your order; the amount of the asset you wish to buy or sell. You may type it in or use the slider to allocate a percentage of your free collateral to your new Limit Order.
Specify your Order Type and optionally choose Reduce Only:
There are multiple types of Limit Orders you may place. They are:
Standard: Your order will rest on the book until it fills or you cancel it. If it is able to be partially filled, the amount which is able to be matched will create a new position, or add to your existing position.
Fill or Kill: Your order must immediately be completely filled, or it will be canceled. Fill or Kill orders work similarly to Market Orders in that they execute immediately, but unlike a Market Order where it will automatically fill for the best price offered by the order book, a Fill or Kill order will execute at the exact price you specify. If it can not, the order is deleted.
Post Only: Post Only ensures that your order will only ever be a maker order. In other words, it will only add liquidity to the order book to be matched by a taker order, it will not consume liquidity already on the book. Post Only is used for market making and ensures that only the maker fees, if any, will ever be paid.
Immediate or Cancel: IOC orders work similarly to Fill or Kill, however they are able to partially fill. If the order partially fills, the remainder of the order which was unable to be matched will be cancelled.
In addition to the multiple types of Limit Orders you can place, there is also the option for Reduce Only. This is useful for when you already have a position open, and are placing Limit Orders as Stop Loss or Take Profit orders. Reduce Only ensures that any order you place will not exceed the size of your existing order, and open a new order in the opposite direction. The most it will ever do is completely close out your existing position, and the remainder of the order, if any, will be cancelled.
Once you have completed all the previous steps, you are ready to place your order. Before doing so, you can preview your order details in the window below the Buy/Sell button. The parameters in the Trade Preview are:
Est. Slippage: Since your Limit Order will execute at the price you specify, there is no slippage.
Liquidation Price: Liquidation Price is not relevant until the order is filled, at which point you will see it listed under the Positions tab below the chart.
Fees: Limit Orders which add liquidity to the books will not incur a fee if matched to a taker order.
Position Size: Displays zero, indicating that the position will not be opened immediately.
Pending Bids: The sum of all of your open Buy orders, including the one you are placing if applicable
Pending Asks: The sum of all of your open Sell orders, including the one you are placing if applicable
Allocated Collateral: The amount of your free collateral which will be reserved for this order
Position Health: The margin ratio of your order
Leverage: The Leverage you specified in Step 1
Note that if you attempt to place a Limit Order that will instantly match, the execution price and unrealized PnL will be displayed:
If you want your order to rest on the book, consider entering a different price until the Execution Price no longer displays.
Once you have reviewed your trade and are satisfied, you can place your order. All of your pending Limit Orders can be viewed in the Orders tab beneath the chart.
Note that if any of your open positions fall below maintenance margin and must be liquidated, your open orders may be cancelled. Be sure to monitor the health of your positions closely.
