What is a post-only order?

Understanding the Basics of Post-Only Orders

A post-only order is a type of limit order used in cryptocurrency trading that ensures the order will only add liquidity to the market. This means the order will not execute immediately against existing orders; instead, it will be placed on the order book, waiting for a matching order. If the order would otherwise match and execute with an existing order (thereby removing liquidity), it is canceled automatically.

This feature is particularly important for traders who wish to avoid paying taker fees and instead earn maker rebates offered by many exchanges. By using a post-only order, traders can ensure their trades are classified as maker orders, which typically have lower fees or even receive rebates.

How Post-Only Orders Function in Trading Platforms

When a trader places a post-only order, the exchange checks whether the order would immediately match with any existing orders at the same price or better. If such a match exists, the system rejects or cancels the order, preventing it from acting as a taker. If no such match exists, the order is placed on the order book as a maker order.

• Order is placed at a non-crossing price: It becomes part of the order book.
• Order crosses the spread or matches existing orders: It gets canceled to maintain its post-only status.

This functionality ensures that the trader does not inadvertently become a liquidity taker. It is especially useful in fast-moving markets where prices change rapidly and the risk of crossing the spread is high.

Use Cases for Post-Only Orders in Crypto Trading

Traders often use post-only orders when they are not in a hurry to execute and prefer to wait for better pricing while earning maker fee benefits. Some specific use cases include:

• Arbitrage strategies, where traders place orders on multiple exchanges and want to ensure they don't pay taker fees.
• Market-making bots, which rely on placing and canceling orders frequently to capture small spreads.
• Limit order stacking, where traders place multiple post-only orders at various price levels to accumulate or distribute assets gradually.

By using post-only orders, traders can optimize fee structures and reduce transaction costs over time.

Differences Between Post-Only Orders and Regular Limit Orders

While both post-only and regular limit orders allow traders to specify a price at which they want to buy or sell, the key distinction lies in execution behavior:

• Regular limit order: Can execute immediately if it matches an existing order, acting as a taker.
• Post-only order: Will not execute immediately and will only remain on the order book as a maker.

This distinction is crucial for traders who want to maintain maker status on exchanges that offer fee discounts or rebates for adding liquidity. Some exchanges even allow traders to see whether an order is classified as a maker or taker in real-time.

How to Set Up a Post-Only Order on Major Cryptocurrency Exchanges

Setting up a post-only order varies slightly across exchanges, but most platforms offer a checkbox or toggle option when placing a limit order. Below is a step-by-step guide for placing a post-only order on popular exchanges:

• Binance:

  • Navigate to the trading pair you want.
  • Select 'Limit' order type.
  • Check the box labeled 'Post-Only' before placing the order.

• Kraken:

  • Go to the advanced trading interface.
  • Under order options, select 'Post-Only' from the dropdown menu.

• Bybit:

  • Choose the 'Limit' order tab.
  • Toggle on the 'Post-Only' option.

• Bitstamp:

  • Go to the order placement panel.
  • Look for the 'Post-Only' checkbox and enable it.

It's essential to verify that the post-only feature is supported for the specific trading pair and account type. Some platforms may restrict this feature for certain markets or user tiers.

Common Mistakes When Using Post-Only Orders

Despite their benefits, post-only orders can lead to unexpected cancellations or missed opportunities if not used correctly. Here are some common pitfalls:

• Setting prices too close to the market price: This increases the chance of the order being canceled due to immediate matching.
• Assuming the order will always execute: Since post-only orders do not cross the spread, they may never get filled in fast-moving markets.
• Ignoring exchange-specific rules: Some exchanges handle post-only orders differently, especially during high volatility or system maintenance.

To avoid these issues, traders should monitor the order book depth and set realistic price levels that are likely to be filled over time without crossing into taker territory.

FAQs

Q: Can post-only orders be used with stop-loss or take-profit strategies?A: Most exchanges do not support combining post-only orders with stop-loss or take-profit features. These advanced order types typically require immediate execution, which conflicts with the post-only rule.

Q: Do all exchanges support post-only orders?A: No, not all exchanges offer post-only orders. Traders should check the platform’s documentation or support center to confirm availability for specific trading pairs and markets.

Q: Are post-only orders available for futures trading?A: Yes, many exchanges that support futures trading also offer post-only order functionality, though the interface and options may differ from spot trading.

Q: Why was my post-only order canceled immediately after placement?A: This typically happens when your order would have matched existing orders on the book. The system cancels it to preserve its post-only status and prevent it from acting as a taker.