What is a "post-only" order and when should you use it?

Understanding Post-Only Orders

1. A post-only order is a type of limit order that executes exclusively as a maker, meaning it must be added to the order book and cannot match immediately with an existing order on the opposite side.

2. If the post-only instruction detects any potential immediate execution against resting orders, the exchange rejects the order outright rather than converting it into a taker order.

3. This behavior ensures the trader avoids paying taker fees and instead qualifies for maker rebates offered by many exchanges.

4. The order remains visible in the order book until either fully filled by incoming market or aggressive limit orders, or canceled manually by the user.

5. Exchanges enforce post-only logic at the matching engine level, making it atomic and non-negotiable once submitted.

Fee Implications and Incentives

1. Most centralized cryptocurrency exchanges apply asymmetric fee structures where makers receive rebates ranging from 0.01% to 0.05%, while takers pay fees between 0.05% and 0.25%.

2. Using post-only orders consistently allows traders to accumulate rebates over time, especially during high-frequency or scalping strategies where order volume is large but individual sizes are small.

3. Some derivatives platforms extend this model to funding rate arbitrage, where precise timing and fee minimization directly impact net profitability.

4. Arbitrageurs deploying cross-exchange latency-sensitive strategies rely heavily on post-only placement to preserve margin efficiency and avoid slippage-induced taker conversions.

5. Market makers operating dedicated liquidity provision programs often configure all resting orders as post-only to comply with exchange requirements for rebate eligibility.

Risks and Limitations

1. A post-only order may fail silently if placed too close to the mid-price during volatile conditions, especially when bid-ask spreads widen rapidly.

2. During flash crashes or sudden liquidity withdrawals, previously safe post-only levels can become executable, leading to unexpected rejections or partial fills outside intended parameters.

3. Traders relying solely on post-only execution risk missing opportunities entirely when price moves past their limit before any matching occurs.

4. Order book depth visualization tools sometimes misrepresent true available liquidity, causing users to place post-only orders based on incomplete data.

5. Certain exchanges do not support post-only flags for stop-limit or conditional orders, limiting its applicability in automated risk management systems.

Integration in Algorithmic Trading Systems

1. High-frequency trading bots embed post-only logic directly into order submission pipelines, validating price distance from best bid/ask before transmission.

2. Multi-leg strategies such as calendar spreads or inter-exchange triangular arbitrage require strict adherence to post-only rules to prevent one leg from executing as a taker and disrupting balance across positions.

3. Backtesting frameworks must simulate post-only rejection mechanics accurately, including latency-based race conditions between order arrival and book updates.

4. Exchange APIs vary significantly in how they report post-only failures—some return HTTP 400 errors, others send WebSocket rejection messages, requiring robust error parsing.

5. Institutional algo suites often layer post-only enforcement atop custom price-discovery modules that dynamically adjust limits based on real-time spread analysis.

Frequently Asked Questions

Q: Can a post-only order ever execute as a taker under exceptional circumstances? No. Exchanges guarantee atomic post-only semantics. Any scenario resulting in taker execution indicates either a bug in the exchange’s matching engine or misuse of API parameters outside documented behavior.

Q: Do decentralized exchanges support post-only orders? Most AMM-based DEXs do not implement order books or maker/taker distinctions, so post-only logic does not apply. However, order-book DEXs like dYdX v3 and Injective Protocol do support native post-only flags via their matching engines.

Q: Is there a difference between “post-only” and “maker-only”? They refer to identical functionality across virtually all exchanges. The terminology varies by platform documentation but carries no operational distinction.

Q: What happens if my post-only order sits unfilled for days? It remains in the order book until canceled, expired, or matched. No additional fees accrue for passive placement, though some exchanges impose idle-order cleanup policies after extended durations.