Introduction to Reduce-Only Order
Available as an additional option to limit orders, reduce-only orders serve to strictly reduce your position size by dynamically reducing or adjusting your limit order's contract quantity to match the contract size of the open position. This ensures that your position will not be unintentionally increased.
Main purpose for trading
By selecting the Reduce-only option with your limit orders, traders can ensure a limit order set to take profit will not be unintentionally executed as a new position with the opposite direction in the case that the current position has been already closed/stopped out/liquidated.
Trader A currently holds Buy Long 1,000 BTCUSD contracts at USD 5,000 and also sets a stop loss order at USD 4,800. In addition, Trader A also wants to set a take profit/partial take profit order with a limit price set at USD 5200. The following are 2 examples of Trader A setting a Take Profit with and without selecting the Reduce-only order option:
- Without Reduce-only Option
If the Last Traded Price triggers the order's stop-loss first and then proceeded to rise back to USD 5,200, the previous take profit limit order will likely be fulfilled, causing the trader to open an unintended Sell position at USD 5200.
- With Reduce-only Option
If the Last Traded Price triggers the order's stop-loss first, the corresponding take profit limit order at USD 5200 will automatically be cancelled, thereby ensuring its non-execution to prevent future unintended opening of positions.
Please take note:
1) In the absence of an open position, regardless of whether there are any other active orders, the system will automatically reject the placing of any reduce-only orders.
2) The "close by limit/market price" function available inside the Position tab has the Reduce-only function embedded by default with the priority of execution. In the event of insufficient margin, active orders with the worst limit price placed in the same direction as the close-by function will be cancelled first.
3) In the case of holding an existing position, and assuming no other active orders, a reduce-only order can only be placed less than or equal to the existing open position's contract size. All other reduce-only orders exceeding the existing position's contract size will otherwise be automatically reduced or cancelled.
4) In the case of holding an existing position and other active orders
Without any existing Reduce-Only order
|With any existing Reduce-only order|
|The contract size of a new reduced-only order plus all active orders placed at a price better than this order cannot have a total contract size larger than the current open position. Otherwise, the contract size of the new order will be automatically reduced or cancelled by the system.||The contract size of a new reduced-only order plus all active orders placed at a price better than this order cannot have a total contract size that larger than the current open position. Otherwise, the reduce-only order with the worst order price will be automatically reduced or cancelled by the system.|