Algorithmic Trading

Limit Orders Now Available on Coinrule

What are Limit Orders?

A limit order is an order that you send into the order book at a specific price, the so-called ‘Limit’. The trade will only be executed if the price in the market reaches this price or surpasses it – hence the name ‘Limit’. Your trading system is now more efficient thanks to limit orders on Coinrule.

Why are Limit Orders used?

A limit order has the advantage that you can trade at exactly the specified price, if not at a better price. Limit orders can be beneficial, particularly when trading a coin that is highly volatile or has a wide bid-ask spread. Buying a coin in a low-liquidity market with a big gap between ‘Bids’ (i.e. buyers willing to buy at a certain price) and ‘Asks’ (i.e. sellers willing to sell at a certain price) brings the risk to buy or sell at a price that is far away from your desired price. A standard ‘Market Order’ will execute the trade at whatever price it can get but the ‘Limit Order’ will only execute at the set price (or above/below depending on whether you are selling or buying).

How Limit Orders can save you Fees

A Market ‘Maker’, is the party that provides liquidity for the order book by placing an order that may be filled in the future, this “makes” the marketplace whereas, a market ‘taker’ consumes the book liquidity by “taking” orders from the order book. The ‘taker’ is someone who decides to place an order that is instantly filled with an existing order on the order book. 

Several exchanges operate on a maker-taker fee structure, providing different trading fees to makers and takers, maker fees on exchanges are generally lower than taker fees, as exchanges incentivize liquidity providers. Once the order reaches the order book, if that fills right away, a taker (higher) fee will apply. On the other hand, if the order sits on the order book for a while, the exchange will charge a maker (lower) fee. Thus, you can save fees by using limit orders if they don’t fill immediately.

Using Limit orders on Coinrule

Coinrule has recently launched Limit Orders as a new feature. There are many ways to use this new feature. 

The most straightforward way is to place a direct order and select ‘limit order’ from the dropdown in the Action Block. The limit price is automatically set to the latest traded market price, i.e. the ‘current live price’ at the moment the condition triggers. It may take time to fill the order, but in case of completion, you will have control over a precise executed price.

You can also use different variations, and make adjustments to pre-designed templates as seen below:

By incorporating limit orders into your rules, you will limit the effect of the bid-ask spread on your trading system. The order might take a bit longer to execute, if ever, in illiquid markets but this ensures that the order will be executed at the best possible price each time. In addition, when trading coins with a low market cap, each transaction can have an effect on the price. Hence by using limit orders, the price at which the order executes cannot be driven up by other traders. Furthermore, when using a limit order, the price you trade at is often better than if trading with market orders. 

Though the difference may be negligible when using small quantities, when you increase the order size, the difference becomes sizable. For example: if you are buying $4,000 USD worth of  Ripple  (XRP) at the market price, the bid-ask spread at the moment is $0.00058. This is a minuscule amount when trading $100, however, as you increase the quantity, this amount begins to increase. At $4,000 you would be losing $2.32.

Wait for your price

Another way to use limit orders on Coinrule is to set the specific price at which you would like the order to fill. This is similar to setting a normal limit order at a specific price. The rule will only execute if the price is $0.18 or greater, as shown below, ensuring that the bid-ask spread and illiquidity on exchanges does not affect you adversely. 

Integrating this new feature into an already existing rule can prove to be effective since it can improve the price at which the order is executed.

The example below shows the difference in executing a trade with a Market and limit order for the same coin at the same time. The bot sends the order at the same time, however, the limit order waits for the execution at a slightly better price than the market order.

Rule Description:
Trade History:

1) Market Order
2) Limit Order

This is because the bid-ask spread of this coin affects the final executed price of the market order. The difference is again quite small in this case, however, when trading with large sums of capital this small difference can end up saving a good amount of money.

Ensuring maximum executions

Normally, limit orders have the drawback that they might not execute due to failing to hit the desired price. However, Coinrule can help take one step further! You can set up a safety range for the execution of limit orders.

You can manage the price range of your limit orders in the setting page. Select the range you would like, increments of 0.5% are available.

This is how it works.

– A rule triggers with a price condition of BTC at 9000 USD
– The related action is to buy BTC with a Limit Order, you selected a margin of 1% in the setting page
– The bot will send a buy order with a price limit 9090 (9000 + 1%).

This will help ensure that a majority of the limit orders execute rather than remaining stuck with unfilled orders. This feature is especially helpful in illiquid markets to increase the rate of executions, in a way that ensures maximum price safety. 

Overall, this new feature can be a valuable addition to your toolbox when using Coinrule to create rules. This feature can have multiple advantages, according to your preference and objectives, by adding a safety range you can significantly improve your execution rate. With this addition, you can now take your trading on Coinrule one step further.

DISCLAIMER

I am not an analyst or investment advisor and nothing in this article constitutes investment advice. Everything that I provide here is purely for guidance, informational and educational purposes. All information contained in my post should be independently verified and confirmed. I can’t be found accountable for any loss or damage whatsoever caused in reliance upon such information. Please be aware of the risks involved with trading cryptocurrencies