Order Types

If you have followed the path of tutorials you might have noticed that all examples I have given have used isolated margin (5x, 10x, etc.). However, there is another margin type - cross margin.

In the next article, I will explain everything you need to know about cross and isolated margin.

You can make different types of orders on Bitmex by using its interface shown in the image below. First, you have to select the type of order you would like to place. As you can see options are limit, market and stop market.

Actually, that is not all, by pressing the down arrow next to stop market some additional types appear - stop-limit, trailing stop, take profit limit and take profit market.

For all order types, you must specify the quantity. It’s important to understand that quantity means the size of the whole position not only your investment. So if you choose leverage of 10x, like shown in the image below, your investment would be approximately 1/10 of the quantity.

Below buy and sell buttons the cost of this order is shown, as well as the value of the order. If you hover the question mark on buttons you can see your estimated liquidation price as well.

Most order types have additional options. For example as shown below limit order has post-only and hidden parameters. All these options and order types will be discussed in this article.

Limit and market orders are the most basic order types on any trading platform.

A limit order, also known as maker order is an order that does not get filled instantly, meaning you make a new entry to order book rather than filling one.

A market order, also known as a taker order, on the other hand, is the opposite, meaning the order gets executed instantly removing an entry or entries from the order book.

The main differences one should consider before choosing a suitable order are fees. If you make a market order you always pay a taker fee, which varies between trading pairs. For example, for XBTUSD the taker fee is 0.075%. Now if you make a limit order and it gets filled you pay maker fee, which on Bitmex is actually a rebate - you get some extra money. For the XBTUSD trading pair, you receive 0.0025% of the order size.

An important aspect to consider is that you always pay or receive fees on the whole position not only on your funds.

For example, if Steve goes long 10,000 contracts with 10x leverage on XBTUSD, he invests $1000, but pays the fee of size 10,000 * 0.075 / 100 = $7.5. On the other with limit order he would have made 10,000 * 0.025 / 100 = $2.5. The difference is $10 which is 1% of Steve’s investment. Of course, all fees are paid and received in XBT like explained in the contracts article.

You should always be careful when entering limit orders because when you choose the wrong price it could execute immediately, so you are actually a taker and have to pay the fee. There are some options preventing unexpected behavior from happening.

First of which post-only. If this is enabled the order will never be executed immediately, meaning you always make a limit order and earn the rebate. If the order is to be executed immediately it is canceled instead.

The second option is called time in force. The default option is GoodTillCancel. It means that your order is live until you cancel it. The other two options come in handy for market orders, ImmediateOrCancel means that if you make an order and it does not get filled or partially filled immediately, the remaining order will be closed. The last option FillOrKill gets executed only if the whole position can be immediately filled, in other cases, it will be canceled.

The third option is hidden - if this is enabled your order is placed in the order book but is not shown to other traders. I personally have never felt the necessity to use this and neither has Steve. It is used by traders in case they do not want the market to be informed by their intentions, which might be useful. If hidden is enabled the new field display QTY appears, so you could control how much of your order is displayed in the order book. These types of orders are called iceberg orders. The downside of hidden and iceberg orders is that you always pay the taker fee on the hidden size of your order.

The last option Bitmex provides is reduce-only. If this is enabled there is no way that you increase your position size but only reduce it. This option comes in handy for taking profit orders. The option is like a security for your calculations.

A funny story happened to Steve once, well of course back then it was, in fact, sad, because Steve lost a lot of money. Steve went long with 10,000 contracts with 5x leverage @$10,000. While Steve predicted the rise to at least $11,000 he decided to sell half of his position if the price reached there. He entered a limit order for selling 5000 contracts, but Steve made a mistake he accidentally entered 50,000 contracts and he ended up with 50,000 - 10,000 = 40,000 short contracts. Of course, XBT rocketed and Steve’s position got liquidated. Well, now Steve can only look back and laugh about it. Don’t be like Steve and always enable reduce-only for profit orders.

All in all, you should always use limit orders when possible. In some rare cases like if the market moving in the same direction when you consider opening your position, you could consider market order just to get in as low as possible. In my experience, you could get into most positions by using a limit orders, since you could always change the price if you feel the necessity.

Stop orders are orders used to limit the loss. One would usually place a stop order to sell his positions in case the market starts moving in the opposite direction.

Three different ways of making a stop order are possible - stop-market, stop-limit and trailing stop. All stop orders have two additional options to be aware of - trigger price and close on trigger, these will be discussed in this section as well.

The most basic stop order type is the stop-market, meaning if the price of the asset reaches the trigger price, the stop order will be immediately executed as a market order. Using a stop-market guarantees that you get rid of your position and because of that this is Steve’s type of choice.

In some cases, stop-market order might not be the most cost-effective. In case of big positions you have to go through order book and there is no way of knowing what the real average execution price would be and of course, with a market order, you always pay the taker fee, as discussed in the previous section.

The second stop order type is stop-limit. The mechanism is the same - when the price reaches the trigger price, the order kicks in. To place the stop-limit order you must enter the trigger price (stop price) and limit price. When price reaches the trigger price, the limit order with the limit price is entered.

Stop-limit order has all the same additional options as a regular limit order with the exception of reduce-only, which for stop order can be controlled by the close option. Stop limit is useful for setting the maximum or minimum price that you want to sell your position. It the price does not fall on that level your positions stay in. There is always a risk of limit order never getting executed.

Third stop order type is trailing stop. This order type lets you specify the amount that the price has to change in order to execute the order. An important note is that trailing stop always executes as a market order.

For instance, Steve goes long @$10,000 he specifies the trail value to be $500, making the stop price to be $9,500 at initialization. Now, price falls and reaches its lowest point @$9,750 and nothing happens. Later that day, price increases to $10,250, that’s where trailing stop kicks in and stop-loss is set to $9,750. If the price now falls to $9,750 again, stop will be executed. Trailing stop price can always move only in one direction if the real price is getting closer to stop price it always stays constant.

Like mentioned, stop orders have 2 common options - trigger price and close on trigger. Trigger price lets you specify which price to use for stop trigger price. In most cases, it is useful to set it to mark price, as it lets you avoid some unnecessary stops.

For example live price could jump really quickly down a $100 and then back again, this might happen in case of some big boy positions getting liquidated or stopped. Mark price never moves that fast but of course, in many cases, you lose a bit more with mark price, since it moves a bit slower and on execution time live price might be somewhat lower already. In my opinion mark price is better for just avoiding stupid unexpected stops and it will benefit you in the long run. Remember it’s a marathon, not a sprint.

Close on trigger option is basically a reduce-only option for stop orders and should be used most of the time unless you are doing some crazy things that are calculated. But in most cases remember, don’t be like Steve, always use a close on trigger option.

Stop orders have 3 different states - untriggered, triggered and filled. Untriggered is the state for a stop order that has never reached its trigger price. Triggered means that trigger price has been reached but the orders have not been executed yet (in case of the limit stop). Filled means that trigger price has been reached and the order has been filled successfully.

Now, as you know what options you have minimizing your losses, let’s discuss take profit orders.

Take profit orders are actually stop orders, just in the opposite direction. They have the same options as well and they appear in the stops tab in orders - trust me this might be more important than you think.

There are two types take profit orders - take profit limit and take profit market orders that work the same way as stop-limit and stop-market”. So if you feel like you do not understand something, just re-read the stop orders section.

As a matter of fact, there is one aspect to consider using both stop orders and take profit orders - Bitmex limits the number of active orders that appear in the stops tab to 10. Depending on your trading strategies it might make a hell of a difference which orders should you use, take Steve for instance.

Steve usually opens the positions and enters the stop order to limit the risk, so he always has at least one order in the stops tab for every position. That’s not all Steve usually has at least 5 take-profit targets, so using take profit orders he would have at least 6 active stop orders for every position. It’s fine until Steve finds a great opportunity to open another position with another trading pair, now he would only be able to enter a stop and 3 take profit targets.

Do not worry, there is a solution. If your strategy fits Steve’s strategy you should use the stops tab for stop orders only. Just use regular limit orders. The only downside is that you have to have an open position before you can enter the limit orders with a reduce-only flag. Bitmex cancels your order immediately if you do not have enough contracts. You always have to wait for the entry to get filled, before you can enter targets. It’s quite a nuisance, but trust me it’s the best way. Well, you could use limit order without reduce-only, but then again if the entry does not get filled you might end up buying opposite contracts if the target level is reached.

Thus far, we have discussed basics, contracts and order types. Some of you might have noticed that all examples I have given have used isolated margin (5x, 10x, etc.) but there is another margin type - cross margin. In the next article, I will explain everything you need to know about cross and isolated margin.