Understanding Scaled Orders
A scaled order is a sophisticated trading strategy that lets you automatically spread 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.
Advantages of Scaled Orders include:
- Market Stability: By breaking down a large order into smaller chunks, scaled orders help prevent drastic price swings and reduce the risk of slippage during periods of high volatility.
- Controlled Execution: Scaled orders allow for a more strategic entry or exit from the market by distributing trades over a range of prices.
Types of Scaled Orders:
- Scale-in order: A scale-in order is when you purchase a security as its price drops one at a time. In an effort to improve the position's overall average price, the trader may begin with a small position and progressively increase it as the price declines.
- Scale-out order: Selling a securities in steps as its price rises is known as a scale-out order. In order to make money while keeping onto part of the position for possible future gains, the trader may begin with a large position and gradually reduce it as the price rises.
- Staggered scale-in order: This type of order entails purchasing securities at pre-established price points in increments. By limiting downside risk, this method can assist the trader in achieving a better overall average price.
- Staggered scale-out order: An order for staggered scale-out entails selling a security in steps at predefined price points. By using this tactic, the trader can make money while maintaining a portion of the position for possible future gains.
Getting Started with Scaled Orders on Phemex
1. Sign in to your Phemex account and navigate to the Contract Trading section.
2. Click on the downward arrow next to 'Limit Conditional' to reveal a dropdown menu. From the dropdown menu, select 'Scaled Order'.
3. Once you've chosen 'Scaled Order', you'll be presented with options to tailor your order according to your strategy:
Price Range: Define the 'Lowest price' and 'Highest price' at which your sub-orders will be placed.
Order Size: Specify the total amount of the asset to be traded.
Number of Orders: Decide on the 'Order count', or how many individual limit orders you want to create.
Size Distribution: Choose how to distribute the size of each sub-order. The options include:
- Flat: Each sub-order will be of equal size within the total amount.
- Ascending: The size of each sub-order increases with the price.
- Descending: The size of each sub-order decreases as the price goes up, making the highest-priced order the smallest.
- Alternatively, you can manually input specific prices and sizes for each sub-order if you prefer a custom distribution.
4. After configuring your scaled order, review all parameters to ensure they align with your trading strategy.
5. Confirm your choices and submit your order. Phemex's system will then process and dispatch the sub-orders to the matching engine as a batch.
By following these steps, you can effectively place a scaled order on Phemex, giving you a strategic tool to trade large volumes without unduly influencing the market.
