Post-only orders
---
Post Only Orders
Post-only orders are a specific type of order used in cryptocurrency futures trading designed to ensure that the order *always* acts as a maker order, adding liquidity to the order book. This is in contrast to a regular market order or limit order which can potentially become a taker order, removing liquidity. Understanding post-only orders is crucial for traders seeking to manage their trading fees and potentially benefit from maker-taker fee structures.
What are Maker and Taker Orders?
Before diving deeper, it's important to understand the difference between maker and taker orders:
- Maker Orders: These orders do not immediately match with existing orders in the order book. Instead, they are added to the order book, creating new buy or sell orders that other traders can fill. Makers provide liquidity.
- Taker Orders: These orders immediately match with existing orders in the order book, removing liquidity. Takers fulfill existing orders.
Most cryptocurrency exchanges incentivize making orders by charging lower fees for makers and higher fees for takers. This is because providing liquidity is beneficial to the overall health of the exchange.
How Post-Only Orders Work
A post-only order instructs the exchange that you *only* want your order to be executed if it can be filled as a maker order. If your order would be executed as a taker, the exchange will simply *not* execute it. This is achieved by setting a price that is sufficiently far away from the current best bid or best ask price that it won't immediately match.
Here's a breakdown:
1. You submit a buy order with a price slightly *below* the current best ask price, or a sell order with a price slightly *above* the current best bid price. 2. The exchange checks if the order can be filled as a maker. 3. If it can (i.e., there are no orders at that price), the order is added to the order book as a maker. 4. If it can’t be filled as a maker (i.e., there *are* orders at that price, meaning it would be a taker), the order is cancelled.
Advantages of Using Post-Only Orders
- Reduced Trading Fees: The primary advantage is lower fees. By consistently acting as a maker, you benefit from the reduced maker fee rates offered by most exchanges. This can significantly improve your profitability over time, especially for high-frequency traders.
- Improved Order Execution: While you sacrifice immediate execution, post-only orders can help you avoid slippage. Slippage occurs when the price at which your order is executed differs from the price you initially intended. By not taking existing liquidity, you are less susceptible to price impact.
- Strategic Order Placement: Post-only orders can be used as part of more complex trading strategies, such as scalping or arbitrage.
- Avoidance of Front-Running: Though not foolproof, post-only orders can slightly reduce the risk of front-running by bots detecting your order and jumping ahead of it.
Disadvantages of Using Post-Only Orders
- Delayed or No Execution: The biggest drawback is that your order might not be filled if the price moves too quickly. If the market moves against your order price, it will be cancelled.
- Requires Price Adjustment: You often need to adjust the price of your post-only order to account for market movements to ensure it remains a maker order. This requires constant monitoring and active management.
- Not Suitable for Urgent Trades: If you need to enter or exit a position immediately, a post-only order is not the right choice. Market orders are preferable in those situations, despite the higher fees.
Implementing Post-Only Orders
Most cryptocurrency exchanges offer a “post only” checkbox or setting when placing an order. This ensures that your order will only be executed as a maker. It’s crucial to verify that the exchange correctly implements this feature. Some exchanges may not fully guarantee post-only execution, especially during periods of high volatility.
Post-Only Orders in Different Trading Strategies
Post-only orders are applicable to a wide range of trading strategies:
- Range Trading: Placing post-only buy orders near support levels and post-only sell orders near resistance levels.
- Breakout Trading: Using post-only orders to enter a position after a breakout from a consolidation pattern.
- Mean Reversion: Setting post-only orders to capitalize on temporary price deviations from the moving average.
- Trend Following: Implementing post-only orders to add to a position in the direction of the prevailing trend.
- Dollar-Cost Averaging (DCA): Using post-only orders to systematically buy or sell a fixed amount of an asset at regular intervals.
- Limit Order Book Analysis: Utilizing the order book to determine optimal post-only order placement based on volume profile and price action.
- VWAP (Volume Weighted Average Price) Trading: Strategically placing post-only orders to achieve a target execution price close to the VWAP.
- Time Weighted Average Price (TWAP) Trading: Similar to VWAP, but based on time intervals.
- Accumulation/Distribution: Using post-only orders to slowly accumulate a position during a downtrend or distribute a position during an uptrend.
- Support and Resistance Trading: Combining post-only orders with Fibonacci retracement levels for targeted entries.
- Elliott Wave Theory: Utilizing post-only orders based on expected wave patterns.
- Ichimoku Cloud: Employing post-only orders in conjunction with Ichimoku Cloud signals.
- Bollinger Bands: Placing post-only orders near the upper and lower Bollinger Bands.
- Relative Strength Index (RSI): Using post-only orders based on overbought or oversold RSI readings.
- MACD (Moving Average Convergence Divergence): Combining post-only orders with MACD crossover signals.
Risk Management Considerations
While post-only orders can be beneficial, it's important to incorporate them into a comprehensive risk management plan. Consider these points:
- Position Sizing: Adjust your position size to account for the potential of your order not being filled.
- Stop-Loss Orders: Always use stop-loss orders to limit your potential losses if the market moves against you.
- Monitor Order Book: Regularly monitor the order book to understand the liquidity and price levels.
- Beware of False Breakouts: Be cautious of false breakouts that could trigger your post-only orders and result in unfavorable trades.
Conclusion
Post-only orders are a valuable tool for cryptocurrency futures traders who prioritize minimizing fees and controlling their order execution. While they require active management and may not be suitable for all situations, they can significantly enhance your overall trading strategy when used effectively. Understanding the nuances of maker-taker fees and the dynamics of the order book is essential for successful implementation.
Order book Liquidity Trading fees Maker-taker model Cryptocurrency trading Futures contract Market order Limit order Slippage Volatility Trading strategy Risk management Order execution Price action Technical analysis Volume analysis Scalping Arbitrage Breakout Trend following Support and resistance Fibonacci retracement Moving average Bollinger Bands Relative Strength Index MACD
Recommended Crypto Futures Platforms
| Platform | Futures Highlights | Sign up |
|---|---|---|
| Binance Futures | Leverage up to 125x, USDⓈ-M contracts | Register now |
| Bybit Futures | Inverse and linear perpetuals | Start trading |
| BingX Futures | Copy trading and social features | Join BingX |
| Bitget Futures | USDT-collateralized contracts | Open account |
| BitMEX | Crypto derivatives platform, leverage up to 100x | BitMEX |
Join our community
Subscribe to our Telegram channel @cryptofuturestrading to get analysis, free signals, and more!