Phemex provides a range of order types designed for various trading markets. Understanding these diverse order types is essential before entering into trading, as it allows you to align them effectively with your trading strategy. This article aims to offer a thorough examination of the order types supported by Phemex, divided into basic and advanced options, empowering you to make informed trading choices.
- Limit Order
- Market Order
- Conditional Order
- Scaled Order
- Take Profit /Stop Loss Order
- Trailing Stop Order
- Partial TP/SL
- Post Only Order
- Reverse Order
- Reduce only Order
Limit Order
A limit order directs users to buy or sell a token at a specific price. By placing a limit order, you establish a price threshold for the transaction. The order will be executed if the asset’s price reaches or surpasses your limit price. However, the order will not be carried out if the market price doesn't reach your limit.
A buy limit order is set below the current market price, whereas a sell limit order is set above it. This arrangement grants the user more authority over the buying or selling price. Employing limit orders can also prevent transactions at unfavorable prices.
It is important to note that limit orders can be classified as maker or taker orders based on how they are used in the market. When a limit order is placed and it is not immediately matched with an existing order on the order book, it adds liquidity to the market, making it a maker order.
Conversely, when a limit order is placed and it is immediately matched with an existing order on the order book, it removes liquidity from the market, categorizing it as a taker order.
For example:
- Buy order: When the current market price stands at $100, a buy limit order set at $80 will solely trigger execution if the market price falls to $80 or lower.
- Sell order: When the current market price is $100, a sell limit order set at $120 will only execute if the market price increases to $120 or higher.
If these limit orders are not immediately matched with an existing buy/sell order and sit on the order book, it will be considered a maker order.
Market Order
A market order is an order to buy or sell a cryptocurrency at the best available price in the current market. It allows the traders to buy or sell a token as soon as possible, regardless of the price.
Market orders are usually executed almost immediately and are ideal for traders who want to buy or sell a token as quickly as possible. When executing a market order, they are considered a market "taker" and your order is subject to taker fees.
For instance, if the current market price of BTC is $70,000, a buy or sell market order will typically be executed at approximately $70,000.
Please note that slippage, which is the difference between the expected price of a trade and the actual price at which it executes, happens when a trader creates a market order.
Several reasons for the slippage:
1. Not enough volume to fulfill an order at the expected price
A part of the order can be filled at the next available price when executing large orders.
2. High market volatility
The bid-ask spread may change between the time a trader places a market order and the time the market maker or exchange executes the order.
3. Low liquidity
Liquidity and slippage have an inverse relationship: when liquidity is high, slippage is low, and with low liquidity, slippage is high.
You can minimize exposure to slippage by simply adjusting your slippage tolerance. Slippage tolerance is the maximum percentage price difference you're willing to accept before your order stops filling or is canceled.
For more information, please visit What Is Slippage?
Conditional Order
A conditional order type allows traders to establish an order by setting a designated "trigger price" for activation, which initiates the order solely upon meeting the specified condition. Conditional Orders can be triggered by either the last price or the mark price.
A Conditional Order remains inactive until it is triggered, therefore it does not impose any margin requirement initially. Upon activation of the condition, the order becomes active and immediately requests a margin. If the available margin is insufficient, the order will be rejected upon activation.
Once the order has been placed, you can review the inactive conditional order in the "Conditional Orders" tab.
There are two (2) types of Conditional Order: Market Conditional Order and Limit Conditional Order. Both work similarly with the Market and Limit Order mentioned above, but only when the preset reference price meets the trigger price, the system will trigger the Market and Limit order placement.
- Limit Conditional Order
The primary concept of this type of order is to execute a limit order solely when the price hits a predetermined trigger price. Until this threshold is reached, the limit order remains dormant.
Two key prices are involved: the Trigger price and the Order price. Traders specify the trigger price to initiate the order, and the order will execute at the limit price once the specified condition is met. Upon reaching the trigger price, the system will execute the order at the limit price or a more favorable price if available.
It can be used to set as a Stop Loss Limit or Take Profit Limit Order, please note that the system will automatically reject orders that fail the margin check or exceed the position limit.
- Market Conditional Order
This functions similarly to the Conditional Limit order, with one notable distinction: it executes the order at the prevailing market price as soon as the price meets the specified trigger price. Traders can use it to place a Stop Loss Market Order or Take Profit Market Order, please note that the system will automatically reject orders that fail the margin check or exceed the position limit.
Scaled Order
A scaled order is a sophisticated trading strategy that automatically spreads a large order across multiple limit orders within a designated price range. This approach is particularly useful when dealing with large quantities, as it divides the total order into smaller, more manageable segments. These segments are then executed separately, minimizing the overall impact on the market price.
To understand more about Scale Order, check out What are Scaled Order and How to Use.
Take Profit /Stop Loss Order
Implementing Take Profit (TP) and Stop Loss (SL) orders is integral to your trade exit strategy. A TP order automatically closes your position once a predefined profit level is attained, while an SL order, serving as a risk management tool, is intended to cap potential losses.
Trailing Stop Order
A trailing stop is an incredibly powerful instruction that can function both as a Take Profit or Stop Loss order. However, rather than triggering at an exact Stop Loss price, it is instead triggered by a specified amount of loss incurred by the most recent optimal Last Price.
Please note that the Activation price is optional, the user can only set the Trail value/Trail Ratio. The activation price should be greater than the current Last price
Head over to How do I set a Trailing Stop Order to follow a step-by-step video guide on how to set a Trailing Stop to an open position
For more information, please review What is a Trailing Stop?
Partial TP/SL
In partial position TP/SL mode, the TP/SL applies to a fixed quantity within the position, ensuring that the order quantity remains unchanged regardless of position size fluctuations.
You have the flexibility to select between a limit order or a market order when the triggered price is reached in this mode. Partial TP/SL - Take Profit & Stop Loss are only valid for the opened order. It is allowed to set multiple TP/SL orders applied to part of the position.
Post Only Order
Post Only is a special order condition that will only allow your order to be posted when it can enter the Order Book. In other words, this condition is designed to ensure that you will become a market maker. If that is not the case, the order will be immediately canceled.
Reverse Position
A reverse position entails both closing an existing open position and opening a position of equal size in the opposite direction, all at once through market orders. This strategy enables swift responses to market shifts by clicking on the “reverse arrow” found in your position displayed in the chart.
Reduce Only
Reduce Only is a special order condition that only allows you to reduce or close a current position you hold. If a Reduce Only order was to increase your position in any way, it will either be immediately canceled or the contract size will be adjusted to prevent an increase.
