Tracking limit orders: A key tool for optimizing market execution

A trailing limit order is an intelligent trading tool that automatically adjusts its quote to follow the market’s best bid and ask prices. Unlike traditional limit orders, this tool dynamically links the quote to real-time market prices, helping traders execute quickly while effectively reducing slippage costs. Whether executing large orders or capturing arbitrage opportunities, trailing limit orders can significantly improve trading efficiency.

Three Core Advantages

Fast Entry and Execution

Traditional limit orders often go unfilled for a long time due to cautious pricing, causing traders to miss market opportunities. Limit orders based on the best bid/ask prices (Bid1/Ask1) can quickly move to the front of the order book, greatly shortening wait times. Acting as market maker orders through maker mode, they enable rapid execution, allowing traders to seize opportunities in fast-changing markets.

Effective Slippage Risk Control

During periods of high market volatility, fixed-price limit orders face a dilemma—setting a high price may result in quick execution at a loss, while setting a low price may never fill. Dynamic trailing limit orders adjust quotes in real-time, always maintaining a certain distance from the best market prices. This approach maximizes the potential for favorable execution while minimizing potential price slippage.

Unlock Arbitrage Opportunities

For professional arbitrageurs, trailing limit orders provide continuous monitoring of market liquidity changes. By precisely tracking price differences across multiple trading pairs, traders can quickly identify risk-free or low-risk arbitrage opportunities across different markets or pairs, achieving stable profits.

How It Works

When using a trailing limit order, traders need to set two key parameters: the initial quote and the trailing distance. The quote can be set at the current best bid/ask (Bid1/Ask1) or at a specified distance from that price. The trailing distance determines the maximum deviation allowed from the current best bid/ask prices.

The platform continuously monitors market price movements. Whenever the best bid or ask changes, the system automatically recalculates the order quote to ensure it stays within the set trailing distance. Once the maximum trailing distance (which can be set as a fixed price or a percentage) is reached, the order stops trailing and remains fixed at that price, waiting for execution. If you have set a trigger price in advance, the trailing strategy only activates when the last traded price reaches that trigger.

Two Practical Scenarios

Scenario 1: Full Trailing Mode

Suppose you want to buy 20,000 ABC tokens, with the current best bid at 0.00123 USDC. You set a trailing order with a maximum trailing distance of 0.00005 USDC and a maximum price cap of 0.00128 USDC.

As the market develops, if the best bid rises to 0.00127 USDC, your order quote automatically rises to 0.00127 USDC, increasing the distance to 0.00004 USDC—still within the allowed range. If the best bid continues to rise to 0.00131 USDC, the calculated quote would be 0.00131 USDC, exceeding your 0.00128 USDC cap. Therefore, the order is fixed at 0.00128 USDC and stops trailing.

Scenario 2: Fixed Distance Percentage Mode

You decide to buy 1,000 ABC tokens with a 2.5% trailing distance at the current market price of 0.00120 USDC. The system calculates the initial quote as 0.00120 × (100% - 2.5%) = 0.00117 USDC.

If the market drops to 0.00119 USDC, the new quote based on 2.5% distance would be 0.00116 USDC, but your order remains at 0.00117 USDC since the new quote is less favorable. Conversely, if the market rises to 0.00125 USDC, the new quote becomes 0.00122 USDC (meeting the 2.5% distance), and your order automatically updates to this price to secure a better deal.

Technical Parameters and Usage Limits

The platform sets specific standards for configuring trailing limit orders to maintain market stability and fair competition:

Distance Range: The trailing distance percentage has a lower limit of 0.01% and an upper limit of 10%, with precision up to two decimal places. This ensures the distance is neither too small (causing frequent adjustments) nor too large (losing the trailing effect).

Account-Level Limits: Each account can open only one trailing order in the same direction (buy or sell) for a given trading pair. Across the entire market, a single account can hold up to 10 trailing orders for different trading pairs, with a maximum of 20 open trailing orders in total.

Order Attributes: All trailing limit orders default to Post Only mode, ensuring they act as market makers and benefit from maker fee discounts. If market volatility causes your order to be rejected five times due to Post Only constraints, the strategy is automatically canceled to prevent infinite loops.

These technical features make trailing limit orders an ideal choice for traders seeking precise execution in complex market environments.