Trailing Limit Order: A trading tool that automatically adjusts prices in a fluctuating market

Tracking limit orders are intelligent trading tools that automatically adjust order prices as market prices change. Unlike traditional fixed-price limit orders, these orders continuously modify their prices based on the latest Ask1/Bid1 quotes until they are filled, canceled, or exceed the maximum tracking distance set. When traders need to execute large orders quickly, tracking limit orders can significantly reduce waiting times and potential slippage risks.

Why Choose Tracking Limit Orders?

The main advantages of these orders lie in three aspects.

Rapid Entry into the Market. With tracking limit orders, traders can quickly enter the market as Maker orders, avoiding long waits for more favorable prices. The system automatically follows the quotes, keeping the order active and greatly shortening the time from placement to execution.

Significantly Reduce Slippage Losses. As prices fluctuate, tracking limit orders dynamically maintain a certain distance from Ask1/Bid1 prices, bringing traders closer to their target prices. This adaptive mechanism greatly reduces the chance of prices deviating from the target, making trading outcomes more predictable.

Open Arbitrage Opportunities. By precisely monitoring market trends and price movements, traders can seize price differences across markets or trading pairs to realize more arbitrage opportunities. This proactive tracking approach enables professional traders to discover trading opportunities that are difficult to capture with traditional order methods.

How Do Tracking Limit Orders Achieve Automatic Price Adjustment?

Traders can set up tracking limit orders in two ways. First, they can directly set the order price at the current Ask1/Bid1 level, or maintain a fixed distance from Ask1/Bid1. This distance can be specified either as a specific value or as a percentage.

The system continuously monitors the market and automatically adjusts the order price to maintain the set distance. Once the distance between the order price and the actual Ask1/Bid1 reaches the maximum limit, the system stops tracking, locking the order at the current price and no longer following market fluctuations.

If traders set a trigger price, the entire tracking strategy only activates when the latest transaction price reaches that level. This provides more precise control, allowing orders to be activated only under certain market conditions.

Practical Scenario Analysis: How Tracking Changes the Probability of Execution

Scenario 1: Following the Latest Quote

Suppose a trader places a buy order for 20,000 ABC tokens at an initial price of 0.00123 USDC (based on the current Bid1). In this setup, the order is not limited by a maximum tracking distance but always moves with the latest Bid1 quote. When Bid1 rises to 0.00124 USDC, the system automatically raises the order price to the same level. If the trader sets a maximum tracking distance of 0.00005 USDC and a maximum fill price of 0.00128 USDC, the order’s price adjustment trajectory might look like this:

Scenario 2: Fixed Percentage Distance Tracking

Traders can choose to maintain a fixed percentage distance from Ask1/Bid1. For example, buying 1,000 ABC tokens with a tracking distance set at 2.5% of the current market price, say at 0.00120 USDC, results in an initial order price of: 0.00120 × (100% - 2.5%) = 0.00117 USDC.

As the market price moves, the order price automatically adjusts to maintain this 2.5% distance:

System Risk Control and Usage Limits

To maintain market order and risk management, exchanges impose strict parameters on tracking limit orders. Each user can hold only one tracking limit order per trading pair per direction (buy/long or sell/short). Additionally, all tracking limit orders can cover up to 10 different trading pairs, and a single account (UID) cannot have more than 20 tracking orders in total.

The minimum tracking distance is set at 0.01% of the trading price, and the maximum at 10%, with precision to two decimal places. All tracking limit orders default to Post Only execution, ensuring they always act as Maker orders to benefit from Maker fee discounts. However, if market volatility causes the order to be rejected five times due to Post-Only restrictions, the system will automatically cancel the tracking strategy.

By combining automatic price adjustment with Maker order advantages, tracking limit orders offer traders a way to execute quickly while maintaining precise price control. Proper use of this tool, along with market analysis, can help traders achieve better trading results in a volatile environment.