What is post-only order in crypto?

Understanding Post-Only Orders in Cryptocurrency Trading

1. A post-only order is a type of limit order used on cryptocurrency exchanges that ensures the order will only be placed on the order book and not immediately matched against existing orders. If the order would result in a trade upon submission—meaning it could be filled instantly—it is canceled instead. This mechanism prevents the trader from paying the taker fee, as they are effectively adding liquidity rather than removing it.

2. The main purpose of a post-only order is to guarantee that traders act as liquidity providers. By using this order type, traders contribute to market depth without triggering execution that would classify them as takers. This is especially beneficial for traders who rely on high-frequency strategies or those aiming to reduce trading costs over time.

3. When placing a post-only order, the price must be set in such a way that it does not cross the current bid-ask spread. For example, if a buy order is placed at or above the current ask price, it would immediately execute and thus be rejected when the post-only condition is enabled. The same applies to sell orders placed at or below the current bid price.

4. Most major exchanges, including Binance, Bybit, and Kraken, offer post-only as an optional setting when placing limit orders. Traders must manually enable this feature, often through a checkbox or toggle in the trading interface. Once activated, the exchange enforces the rule automatically, rejecting any order that would otherwise execute immediately.

5. Post-only orders are commonly used in conjunction with market-making bots or arbitrage strategies where maintaining a passive position on the order book is crucial. Since these strategies profit from the bid-ask spread and rely on volume-based rebates, avoiding taker fees significantly improves net profitability.

Advantages of Using Post-Only Orders

1. One of the most significant benefits is the avoidance of taker fees. Exchanges typically charge higher fees for takers—those who remove liquidity—while offering lower or even negative fees (rebates) for makers. By ensuring an order remains on the book, traders consistently qualify for maker pricing.

2. Post-only orders enhance price control. Traders can set precise entry or exit points without the risk of slippage from immediate execution. This precision is vital in volatile markets where small price differences can impact profitability.

3. These orders help maintain clean trading strategies, especially in algorithmic setups. When bots place orders at specific price levels, the post-only function prevents unintended executions that could disrupt the intended logic or position sizing.

4. They reduce the likelihood of adverse selection. By avoiding immediate fills, traders are less likely to trade against informed market participants who may be triggering stop-losses or exploiting short-term imbalances.

5. In fast-moving markets, post-only orders prevent accidental market-like behavior from limit orders. Without this safeguard, a limit order intended to be passive might cross the spread and execute instantly, leading to unexpected exposure or cost.

Risks and Limitations of Post-Only Orders

1. The primary limitation is that the order may not execute at all. If market conditions do not reach the specified price, the order remains unfilled, potentially causing missed opportunities, especially in rapidly trending markets.

2. During periods of high volatility, price gaps can occur, making it difficult for post-only orders to be filled even if they were close to the market price before the move. This can be particularly frustrating for traders attempting to enter or exit positions during news events or macroeconomic releases.

3. Some exchanges display a warning or error message when a post-only order is rejected due to being executable immediately. While this protects the user, it may require constant monitoring or adjustments to order placement, especially in tight spreads.

4. Traders relying on speed may find post-only orders restrictive. In highly competitive environments, being passive on the book means other traders can jump ahead by placing better prices, resulting in lower fill rates.

5. Not all trading pairs or markets support post-only functionality equally. Less liquid assets may have wider spreads, increasing the difficulty of placing viable post-only orders without constant adjustment.

Frequently Asked Questions

What happens if a post-only order would immediately match?It gets canceled automatically by the exchange. Instead of executing as a taker order, the system rejects it to preserve the user’s status as a liquidity provider.

Can post-only orders be used with stop-loss or take-profit triggers?Some advanced platforms allow conditional orders to include post-only settings, but this depends on the exchange. Not all platforms support post-only in combination with stop orders.

Do post-only orders guarantee a fill?No, they do not. These orders only add to the order book and will remain unfilled unless market price reaches the specified level and there is sufficient counter-party interest.

Are post-only orders available on all cryptocurrency exchanges?Most major exchanges support them, but availability varies by platform and trading pair. Users should check the specific order types offered in the trading interface before assuming availability.