Limit Order Follow: How Dynamic Trading at the Best Prices Works

Limit order with trailing — an innovative tool for traders seeking to execute maker orders at the most favorable bid and ask prices. Unlike standard limit orders, this type of order automatically adjusts your bid or ask price in real time, responding to changing market conditions. This adaptability helps minimize waiting time and reduce slippage risk when executing large positions.

Main advantages of using a trailing limit order

Traders employing a trailing limit order gain several specific benefits in the market.

First, it is a tool for quick entry into a position. Instead of manually adjusting your order with each market change, a trailing limit order automatically modifies your bid or ask within set parameters. This allows traders to participate as a maker—placing orders in the order book rather than as a taker, accepting existing offers.

Second, it reduces slippage. When placing a large order, the market price often moves against you before the order is filled. A trailing limit order helps avoid this scenario by dynamically approaching the best available price without falling below your minimum requirements.

Third, it offers potential arbitrage opportunities. By closely monitoring price movements across multiple pairs or exchanges, traders can identify discrepancies in quotes and profit from them using an automatic trailing limit order.

How does a trailing limit order work: core mechanism

The operation of a trailing limit order is built on two key components: reference price and trailing distance.

When you place such an order, the platform sets the reference price to the current best bid (Bid1) or ask (Ask1). You then specify the distance that your order should stay from this reference price. This distance can be expressed as an absolute value (e.g., 0.0001 USDC) or as a percentage of the last traded price (LTP).

The system continuously monitors the market. If the Bid1 or Ask1 quote moves favorably, the platform automatically moves your order to match the new best price, maintaining the set distance. This process occurs without any intervention from you.

You can also set a maximum trailing distance. When this limit is reached, the order stops trailing the market and remains in place, waiting for execution. The maximum distance can be set as an absolute value or a percentage. By default, the minimum trailing distance is 0.01%, and the maximum is 10% of LTP.

Additionally, you can specify a trigger price. When the last trade price reaches this level, the trailing limit order activates and begins its trailing function.

Scenario 1: automatic trailing of the best quote

This first type can be called “pure trailing.” In this case, your trailing limit order is not limited by a predefined maximum distance. Instead, it constantly tracks the quote movement, syncing with the best price until it is executed or canceled.

For example, suppose a trader places a buy order for 20,000 ABC at Bid1, which at the time of placement is 0.00123 USDC. The platform sets this as the reference.

When the market price rises to 0.00124 USDC, Bid1 also increases to this level. The system immediately updates your order price to 0.00124 USDC to stay at the best position in the order book.

If you set a maximum trailing distance of 0.00005 USDC and a maximum price limit of 0.00128 USDC, then as the market continues to rise:

When the distance reaches 0.00005 USDC, the system stops trailing, and the order “freezes” at the maximum price limit, waiting for execution.

Scenario 2: fixed distance from the best quote

The second approach involves placing a trailing limit order at a constant distance from the reference quote. The key difference is that the chosen distance remains fixed, but the order still moves with the market.

For example, a trader places a buy order for 1000 ABC with a trailing distance of 2.5% from the market price. At placement, the market price is 0.00120 USDC. The limit order is set at: 0.00120 × (100% – 2.5%) = 0.00117 USDC.

Now, as the market fluctuates, the platform moves the order to always stay 2.5% below Bid1:

In this scenario, when the market falls, the order stays put since the distance condition is already met. When the market rises, the system moves the order upward to restore the 2.5% distance.

Rules and limitations for trailing limit orders

To use this tool effectively, you should be aware of the platform’s technical requirements:

Order quantity limits: each user can place one trailing limit order per trading pair and direction (buy or sell). The maximum number of active orders is 10 different trading symbols and up to 20 total trailing limit orders simultaneously.

Trailing distance: minimum is 0.01%, maximum is 10% of the last trade price (LTP). Both values are calculated with two decimal places.

Order execution type: all such orders are “Post-Only” by default, ensuring maker execution. This means your order will not match existing offers but will only add to the order book.

Stability condition: during high market volatility, if your order is rejected more than five times due to Post-Only restrictions, the strategy will be automatically canceled to prevent uncontrolled failures.

Conclusions on using trailing limit orders

A trailing limit order is a powerful tool for traders who want to combine the reliability of maker orders with the flexibility of adaptive pricing strategies. This order type is especially useful when executing large positions in volatile markets, where straightforward order placement can lead to slippage or deviations. By properly setting the trailing distance and maximum limits, you can achieve the best balance between quick entry and quality of execution.