What is a follow-up limit order: a complete guide for traders

A limit order is an instruction to buy or sell an asset at a specific price or higher. A trailing limit order is a modern modification of this tool — it is an intelligent limit order that automatically adjusts to market movements. Instead of remaining static at a single price level, such an order actively monitors market changes and modifies its own price, staying competitive until execution or cancellation.

Simply put: a limit order is a tool for controlled entry into a position, and a trailing limit order is an enhanced version that “catches” the best price while waiting for execution.

Key Advantages of Trailing Limit Orders

Why do traders choose trailing limit orders over regular market orders? There are several compelling reasons.

Faster Trade Execution

A trader can quickly enter the market without sacrificing the execution price. Instead of waiting indefinitely for a more favorable quote, a trailing limit order works actively: constantly checking market quotes and updating its price to stay at the best offer (Ask1) or bid (Bid1). As a result, the order is executed as a maker order as quickly as possible, saving significant time.

Protection Against Slippage

Slippage is the difference between the expected and actual execution price. A limit order is precisely the tool that minimizes this risk. Because the price continuously adjusts following supply and demand movements, the likelihood of getting a worse price is greatly reduced. You remain as close as possible to your target price even amid market volatility.

Opportunities for Arbitrage Traders

Careful tracking of micro-level market data opens new opportunities. Traders who monitor quotes and inter-exchange spreads can use this tool for more precise positioning. This is especially useful when trading between different trading pairs or seeking price discrepancies.

How a Trailing Limit Order Works

Understanding the internal mechanism is key to effective use. A limit order is not just a static instruction but a set of parameters you define.

Main Configuration Elements

To place a trailing limit order, you need to specify:

1. Reference Point: you can tie the order price to the current best bid (Bid1 for selling or Ask1 for buying)

2. Trailing Distance: specified either as an absolute value (e.g., 0.00005 USDC) or as a percentage (e.g., 2.5%)

3. Maximum Distance: when the order moves away from the market price by this distance, it stops trailing and “freezes” at the current level

4. Trigger Price (optional): if set, the limit order activates only after the last trade price reaches the specified value

After placement, the platform continuously adjusts the order price, keeping it up-to-date. All changes happen automatically until one of the following occurs:

• The order is filled
• You cancel it
• The order reaches the maximum distance and “freezes”

Practical Examples

Scenario 1: When a trailing limit order literally follows quotes

Imagine you want to buy 20,000 ABC tokens. At the time of placement, the Bid1 price is 0.00123 USDC. You place a trailing limit order without specifying a maximum distance, meaning the order will follow the quote indefinitely.

Market develops as follows:

• Bid1 rises to 0.00124 USDC
• Your order automatically updates to 0.00124 USDC
• Bid1 continues to rise to 0.00127 USDC
• The order updates again

In this scheme, the trailing limit order is a tool that always remains in the queue for execution at the best price.

Scenario 2: When a trailing limit order maintains a fixed distance from the quote

This time, you place a limit buy order for 1,000 ABC with a 2.5% distance from the current market price. The initial price is 0.00120 USDC.

Calculation: 0.00120 × (100% - 2.5%) = 0.00117 USDC — this is your initial order price.

Now, observe what happens as the market changes:

Logic is simple: if the price falls, your order becomes even more attractive, so it stays in place. If the price rises, the trailing limit order updates its level to maintain the 2.5% distance.

Practical Limitations and Rules

It’s important to know the parameters within which this tool operates:

• One order per symbol: each trader can place only one trailing limit order for each trading pair on each side (buy or sell)

• Maximum 10 different pairs: open trailing limit orders can be placed for up to 10 different symbols simultaneously

• Overall limit: one account can hold no more than 20 active trailing limit orders in total

• Trailing distance: minimum is 0.01%, maximum is 10%, with accuracy up to two decimal places

• Execution mode: all such orders default to Post Only mode (passive), meaning they execute only as maker orders

• Protection against deviations: if during extreme volatility your order is rejected five times due to Post-Only status, the strategy will automatically cancel

Usage Tips

A trailing limit order is a powerful tool, but its effectiveness depends on proper application:

1. Use for large volumes: trailing limit orders are especially useful when trading significant amounts and aiming to avoid slippage

2. Combine with triggers: setting a trigger price allows the order to activate exactly when needed, without constant monitoring

3. Monitor volatility: during high volatility periods, ensure the maximum distance is set realistically — too narrow may lead to order cancellations

4. Analyze market depth: before placing, review the order book to understand where volumes concentrate and set your order at an optimal distance

A trailing limit order requires understanding market mechanics but can significantly improve your trading quality and reduce trading costs.