Crypto futures allow users to trade cryptocurrencies without actually possessing them. This way, traders can take risks on a token’s future price without having to own any tokens. The crypto futures market is becoming increasingly popular because of its high volatility and the possibility to make a profit no matter whether a token’s price rises or falls. This is done by going long or selling short. Moreover, futures are convenient for many traders because it does not involve other risks related to cryptocurrencies other than the price changes. However, trading crypto futures can appear complicated due to the different types of orders that crypto exchanges offer.
Huobi Futures supports three types of orders. To make the journey to crypto futures easier, we will summarize the essential information about each order type. Also, if you are new to trading, it could be good to begin from our article about Understanding Different Types of Orders.
A limit order allows users to place an order at a specific or better price. Limit orders aren’t instant orders; instead, the exchange places them in an order book, and once the price gets to the right level, the order gets triggered. This way, the trader becomes a market maker, which means he does not have to pay fees. A trader can set the limit order lower or higher than the current price, and once the market price reaches the limit price, the trade gets executed automatically.
A limit order can be helpful in a situation where the current price is not ideal, and there is a need to buy at a lower price or sell at a higher price. A trader should use a limit order when he is not in a hurry to buy or sell the contract. He can pursue a better price by reading a chart and setting the limit order to possible price levels called support and resistance levels. However, the price may not reach the intended price, and the trader may miss out on the trading opportunity. Also, the limit order might not even get triggered at desired price level because of a lack of bids to activate the order.
What are the options I have with limit orders?
The exchange does not execute Post Only orders immediately. Instead, the order will exist in the order book as a market maker that does not match the orders already on the order book. Therefore maker orders add liquidity to the market, which helps the smooth operation of the market.
The entire post-only order will automatically get canceled if any part of the order executes immediately due to its price after arriving at the order book. This ensures that a trader will only pay a maker fee, not a taker fee for an order.
An immediate or cancel order (IOC) is an order for executing all or part of the trade immediately at the price and quantity available and canceling any unfilled portion of the order. The IOC will automatically cancel if no quantity is available at the chosen price when a user places the order.
A fill or kill order (FOK) is an order for either filling the entire order immediately or otherwise canceling the order.
Best Bid Offer (BBO) is intended only for Limit Orders. BBO sets the limit order at the best current sale price when a trader opens a long trade and at the best current buy price when shorting. Thus, the trader has to enter only the order quantity, not the price, to open a trade. It is possible to use Best Bid Offer for both buy and sell orders.
A trader can also set the trade using Optimal 5, Optimal 10, and Optimal 20. The trade will get placed on the best possible price level that the next 5, 10, 20 open trades on the order book allows. Therefore, a trader does not have to set a specific price level for opening a trade. These three options are also available for Trigger orders and Trailing Stop orders.
Amount (Cont) is a value that describes different dollar values of the contracts. A trader uses it to inform how much USD he wants to place in a trade. Each token has its own Cont values specified by the exchange. For example, for BTC, 1 Cont is equivalent to 100 USD, and for ETH, 1 Cont is 10 USD. Therefore if he wants to invest 1000 USD worth in BTC, a trader types 10 in the Amount (Cont) field.
A trigger order is a pre-set order that helps the trader automate entries and exits. In trigger order, the trader’s order price gets placed automatically once the market price reaches the trigger price. Trigger orders can be good for someone who is not spending much time on the market because a trader can set the orders in advance to sell or buy contracts. Like in a limit order, a trigger order is placed with an order price and contract amount with an option to buy or sell a contract.
Traders should use a trigger order when they have a hypothesis about future price movements, and they want to take a chance on that possibility. In addition, they should use it to prevent themselves from a big loss and unnecessary risk – the trigger price can be set on a support level that has a potential big drop below it. Nevertheless, a trigger order differs from a regular stop order in that it does not close the margins or positions.
Trailing stop order
Trailing stop order is used by traders to maximize profits and minimize losses. It makes it possible because the trailing stop keeps the trade open, locking profits for as long as the market price continues progressing in the trader’s favor. The trailing stop doesn’t move in another direction, and when the price starts to move in the opposite direction, the trailing stop closes the trade automatically at the market price.
So, unlike regular stop-loss that automatically closes the position at a pre-set level, the trailing stop order is set at a determined level and gets closed only if the tokens price changes by a specified percentage or dollar amount. When the trader is going long on the position, he must set the trailing stop order under the current market price. If the trader is shorting the position, the must set the trailing stop above the current market price.
The activation price is the price level that triggers the trailing stop order. When a trader wants to place a buy trailing stop order, the activation price must be lower than the current market price. The activation price must be higher than the current market price when a trader is placing a sell trailing order.
The callback rate is the percentage change from the last highest or lowest price at which the order will close out.
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