Beginner's Guide — Introduction to Futures Order Types

What is an order?

Simply put, an order is an instruction to buy or sell an asset on the market or XXKK. Orders are generated by users buying or selling assets. Before we can discuss the order types, we should first understand the concepts of makers and takers in trading.

The cryptocurrency market is made up of maker and taker orders. Maker orders are placed on the order book rather than being immediately executed. Makers and takers play different roles, and both are required to execute trades and keep the market running.

For example, suppose you create a limit order to sell 1 BTC when the price reaches $60,000. These orders create (make) liquidity for the market, making it easier for other traders to buy or sell BTC immediately when the conditions are met. The people who buy or sell instantly are called takers. In other words, the takers fill the orders created by the makers.

Exchanges typically charge reduced maker fees to incentivize makers to provide liquidity. On XXKK, regular users pay 0.02% futures maker fees and 0.06% futures taker fees. Learn more about fees.

Order types

Market orders, limit orders, and trigger orders are common order types in both spot and futures trades. 

1. Market order

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The simplest order type in XXKK futures trading is a market order. As the name suggests, a market order is an order executed immediately at the current market price. Note that in volatile markets such as the crypto market, the order is matched with the best price available, which may differ from the price at the time of execution. If the order is not filled or not fully filled, the system continues to place the next order at the latest price that is most likely to be filled.

2. Limit order

A limit order, on the other hand, is slightly different. Although they are also set to be executed as soon as possible, limit orders will only be executed when the specified price or better is met. Limit orders are placed in the order book at a specific limit price determined by the user and will only be executed when the market price reaches the limit price (or better). Therefore, limit orders help users buy at a lower price or sell at a higher price than the current market price. Unlike a market order, which executes immediately at the current market price, a limit order is placed in the order book and only triggered when the price is reached.

Suppose you want to buy BTCUSDT perpetual futures, and the current price is 66,000 USDT. After entering the USDT amount you want to spend on the trade, a market order will be executed immediately at the best price.

If you want to buy BTCUSDT perpetual futures at a better price, select Limit Order and enter the price you want to trade (for example, 66,000 USDT). The order will be placed in the order book and executed at a price closest to 66,000 USDT.

3. Take-profit/stop-loss order

A take-profit (TP) order closes a position once it becomes profitable, while a stop-loss (SL) order limits losses on a current position. Both can be placed easily with the TP/SL function.

XXKK provides the TP/SL function where users can set a TP/SL price in advance. When the latest market price reaches the specified price, an order will be placed at the best available price. Users only need to input the TP/SL price and amount to place their orders.

TP/SL orders can be applied when the user has an open position but is unable to continuously monitor the market. In principle, they can be applied at any time according to users' actual needs.

For example, if you open a long BTCUSDT futures position for $66,000, setting a TP/SL based on the values in the diagram above means that a TP order will be triggered to take profit when the price rises to $70,000, but a SL order will be triggered to reduce risk when the price falls to $60,000.

If you open a short BTCUSDT futures position for $66,000, setting a TP/SL based on the values in the diagram above means that a SL order will be triggered to control risk when the price rises to $70,000, but a TP order will be triggered to take profit when the price falls to $60,000.

If the market experiences significant volatility, TP/SL orders may not execute in full or in part.

4. Post-only order

After understanding the general order types in futures trading, we can now explore some of the more advanced order types. Post-only orders, for example, are advanced limit orders that ensure that your orders are not matched with orders already on the order book and that your transaction fees are charged at the maker rate.

Post-only orders serve two primary purposes:

1. Guaranteed lower maker fees.

2. To avoid losses caused by operational errors.

The first purpose is easy to understand as maker fees are typically lower than taker fees. To elaborate on the second purpose, we may end up losing more in the trigger price that we set than the best market price. For instance, unintentionally adding or omitting a zero in the order can lead to significant losses upon execution. By enabling the post-only feature, when you attempt to buy cryptocurrency at a price higher than the current market price, the system will automatically cancel the order to safeguard against purchasing at an inflated price.

Conclusion

Whether seizing market opportunities through market orders, setting precise pricing through limit orders, or automating trading bots through conditional orders, a comprehensive knowledge of all types of orders helps users better navigate the market and make informed decisions based on their trading objectives. By delving into these fundamentals, you will be able to tailor your trading strategies to your personal preferences and goals and become an informed trader.