Bybit offers a variety of order types tailored to different trading markets. Before engaging in trading, it's crucial to grasp these diverse order types to align them effectively with your trading strategy. This article aims to provide a comprehensive overview of the order types supported by Bybit, categorized into basic and advanced options, enabling you to make well-informed trading decisions.

 

Basic Order Types

Let's begin by exploring the basic order types offered by Bybit: Market Order, Limit Order, and Conditional Order. These essential order types serve as the foundation for the more advanced options. Gaining a thorough understanding of these fundamental concepts is crucial for mastering Bybit's trading functionalities.

 

 

1. Market Order

A Market Order is the simplest type of order, commonly used when you want to execute a trade swiftly at the current market price. When you place a Market Order, it's executed immediately at the best available price (i.e. best bid price for a sell order or best ask price for a buy order), ensuring swift entry or exit from a position. 

While Market Order offers the benefit of quick execution, it's important to remember that the ultimate execution price might experience minor shifts due to market volatility, a situation often referred to as slippage.

 

When you place a Market Order, you're essentially fulfilling or removing an existing order from the order book. In this role, you're considered as a market taker because you're extracting liquidity from the market, which results in a slightly higher fee known as the taker fee.

 

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Difference Between Maker Orders and Taker Orders

Glossary: Market Order

Bybit Trading Fee Structure

2. Limit Order

Limit Order provides greater control over the execution price. When you place a Limit Order, you specify the exact price at which you want to buy or sell an asset or contract. If the market reaches your specified price, your order will be executed at that order price or a better one if the order price is less favorable than the market price. However, there's a chance that your Limit Order might not be executed if the market doesn't reach your specified price. 

 

Two (2) possible scenarios can happen for Limit Order:

 

i) Limit Order Placement and Maker Fee:

When you place a Limit Order, it goes into the order book and gets executed at the specified price. For example, if Trader A places a buy limit order at $10,000, while the best ask price is $11,000, the order goes into the book, adding liquidity. A lower maker fee applies upon execution.

 

ii) Taker Fee for Immediate Execution:

If your set place order price is less favorable than the market price, the Limit Order is filled immediately at the best available price, like a Market Order. For instance, if Trader A places a sell limit order at $10,000, while the best bid is $11,000, the order is executed at $11,000 as a Market Order, and a taker fee is charged. This approach prevents placing orders below or above the desired prices. For users who want to avoid taker fees being charged, they often utilize Post-Only Limit Order which we will explain further under the Advanced Order Types. 

In summary: 

— For Buy Limit Orders, the order price needs to be set at a price lower than the last traded price, otherwise, it will be filled immediately as a Market Order (where a taker fee will be charged).

— For Sell Limit Orders, the order price needs to be set higher than the last traded price otherwise, it will be filled immediately as a Market Order (where taker fee will be charged).

 

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Why Did My Limit Order Get Executed Immediately?

Glossary: Limit Order

3. Conditional Order

Conditional orders provide a layer of automation to your trading strategy. These orders are triggered and placed into the order book when certain conditions, such as a trigger price, are met. Traders can use different reference prices as the trigger basis, such as Last Traded Price, Mark Price, and Index Price. 

 

There are two (2) types of Conditional Order: Conditional Market and Conditional Limit Order. Both work similarly with the Market and Limit Order mentioned above, but only when the preset reference price meets the trigger price, the system will trigger the Market and Limit order placement. 

 

Conditional orders are commonly used to simulate common order types, such as: 

 

• Stop-Entry Orders

By using Stop-Entry Orders, traders can trade a breakout on the market. A Stop-Entry Order triggers a Market or Limit Order when a specific price is reached, enabling entry at a favorable level. For Buy Stop Orders, the trigger price is typically higher than the Last Traded Price, while for Sell Stop Orders, the trigger price is usually lower than the Last Traded Price.

• Take Profit (TP) and Stop Loss (SL) Orders

A Take Profit Order will automatically close a position when a certain profit level is achieved, while a Stop Loss closes a position when it reaches a specific loss level. These function like a Stop Entry Order but are used to exit trades. On Bybit, we have integrated Take Profit and Stop Loss orders for trader convenience, which operate on the same principles as Conditional Orders. We'll explore these further in the section about advanced order types.

 

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Explained: What Are Stop-Loss and Stop-Limit Orders?

The Reason Why Conditional Orders Are Triggered But Not Successfully Executed

What Are The Pros And Cons Of Using LTP Or Mark Price To Trigger Your Conditional Orders?

Advanced Order Type

The three (3) fundamental order types above lay the groundwork for your trading activities on Bybit. As you become more adept at using these basic orders, you'll be well-prepared to delve into the more advanced order options that the platform offers. Moving forward, we will introduce the Advanced Order types supported by Bybit.

 

 

1. Take Profit/Stop Loss Order

Take Profit (TP) and Stop Loss (SL) orders are crucial elements of your trade exit strategy. A TP order closes your position upon reaching a specific profit level, while an SL order, which serves as a risk management measure, is designed to limit potential losses. It's important to note that Bybit has integrated a built-in TP/SL function, making it user-friendly and effective for managing trades. Keep in mind that TP and SL orders operate slightly differently in the Spot and Derivatives markets.

 

Read More

Introduction to Take Profit and Stop Loss (Spot Trading)

Introduction to Take Profit and Stop Loss (Perpetual and Futures Contracts)

Why Was My Position Liquidated Despite Having A Stop Loss?

 

 

 

 

2. Iceberg order

Iceberg Order is a strategic approach to placing large trades and addressing the challenges of market impact and slippage. This automated strategy splits significant orders into discreet sub-orders, allowing quick market entry while minimizing slippage. It is ideal for Market Makers, it enables users to discreetly influence market dynamics without exposing their full position. The strategy's automatic order splitting conceals trading intentions, making it optimal for those who prefer not to expose pending orders to the market. For more information, please refer to Iceberg Order. 

 

 

3. Post-Only 

A Post-only is an instruction to only place a Limit or Conditional Limit Order on the order book if it doesn't immediately match with an existing order. In other words, it's a way to ensure that your order doesn't result in an immediate trade and is only added to the order book as a maker order, otherwise, the system will automatically cancel the Limit Order from execution. This type of order is commonly used by traders who want to earn maker fees and provide liquidity to the market. For more information, please refer to Post-Only Order.

 

 

 

 

4. Time in Force Selections (GTC, IOC and FOK) 

Time in Force (TIF) selections are instructions that specify how long an order should remain active in the market before it's either executed or canceled. Here are the three (3) common TIF selections:

 

Good 'Til Canceled (GTC): A GTC order remains active until it's manually canceled by the trader. It will persist in the order book until it's either executed or removed by the trader, regardless of the time it takes.

 

Immediate or Cancel (IOC): An IOC order requires that the order be executed immediately, either in part or in full. Any portion of the order that can't be executed right away is canceled. This option is often used for orders that require immediate execution and any remaining portion is not left pending. Bybit’s Market Order is a good example of an IOC order. 

 

Fill or Kill (FOK): An FOK order demands that the entire order be executed immediately. If the entire order can't be executed immediately, the entire order is canceled. This option ensures that the order is either executed in full or not executed at all.

 

These Time in Force selections provide traders with the flexibility to tailor their orders to their trading strategies and market conditions. For more information, please refer to Time in force selections (GTC, IOC, FOK).

 

 

 

 

5. Trailing Stop Order 

A Trailing Stop Order is a dynamic order type used to lock in profits and limit potential losses as the market moves in a favorable direction. It automatically adjusts the stop price, following the market price by a set distance or percentage. If the market price moves in the trader's favor, the trailing stop order's stop price will move accordingly, helping to capture more profit if the market continues to rise. However, if the market reverses and reaches the stop price, the order will be triggered, aiming to limit losses. This order type offers a balance between securing gains and allowing for market fluctuations. For more information, please refer to the Trailing Stop Order.

 

 

 

 

6. TWAP Order Strategy

A TWAP (Time-Weighted Average Price) order is a specialized order type used to execute a trade gradually over a specified time period, aiming to achieve an average price that reflects the market conditions over that time frame. Instead of executing the entire order at once, a TWAP order breaks the order into smaller parts and spreads out their execution evenly throughout the chosen time interval. This strategy helps traders avoid impacting the market significantly with a single large order and aims to achieve a price that's close to the average market price during the specified period. For more information, please refer to Introduction to TWAP Strategy.

 

7. One-Cancels-the-Other Order (OCO)

One-Cancels-the-Other (OCO) orders offer traders a powerful tool for the simultaneous execution of different order types, enhancing risk management and trade automation. This functionality pairs two (2) conditional orders, with the automatic cancelation of one (1) order triggers the other. OCO orders are tailored to elevate trading efficiency and risk control, offering you a competitive edge in the market. For more details, pelase refer to One-Cancels-the-Other (OCO) Orders.

 

 

 

 

8. Reduce-Only 

A Reduce-Only Order is a type of Limit Order that allows traders to reduce their existing position size but not increase it. It is used to manage risk and control the size of a position. When placing a Reduce-Only order, the intention is to only decrease the exposure in the market, ensuring that the order won't inadvertently increase the position size. For more information, please refer to Reduce-Only Order.

 

9. Close on Trigger 

A Close on Trigger is an instruction to automatically close a position when a specific trigger condition is met, namely the certain price level reaches the trigger price. This type of order is commonly used to secure profits or manage losses by executing a trade when the market reaches a predefined level. It allows traders to automate their exit strategy based on predetermined trigger price, enhancing efficiency and risk management. 

 

While both Close on Trigger and Reduce-only orders involve managing positions, their primary focus and functionality are different. Close on Trigger orders are triggered by price levels (used in Conditional Order), while Reduce-only orders are used to specifically reduce position size (used in Limit Order). For more information, please refer to Close On Trigger Order.

 

 

10. Scaled Order

A scaled order is an algorithmic order type that executes big orders without instigating violent market volatility or impacting market participants’ behavior. A scaled order splits a large order into several sub-orders within a specific price range and places them as separate limit orders at incrementally increasing or decreasing prices. For more information, please refer to Scaled Order.

 

11. Chase Limit Order

Chase Limit Order is a limit order placed at the best bid or ask that dynamically adjusts its entry price to match changing market conditions until the order is filled, canceled, or reaches a maximum chase distance. It is more effective for traders seeking to execute big orders as limit orders while minimizing waiting time and potential slippage. For more information, please refer to Chase Limit Order. 

 

 

 

 

Conclusion

Whether it's seizing opportunities with market orders, fine-tuning prices with Limit Orders, or automating actions with Conditional Orders, a comprehensive grasp of order types equips traders to navigate the market with confidence and make informed decisions aligned with their goals. This solid understanding of the foundation will empower you to make informed decisions and tailor your trading strategy to your preferences and goals.