What is the use of the hidden entrustment function of Bybit contract? Which strategies are suitable?

Bybit's hidden entrustment function allows traders to split large orders into smaller, visible portions, minimizing market impact and improving execution prices.

May 04, 2025 at 10:49 am

The hidden entrustment function on Bybit, also known as a hidden order or iceberg order, is a powerful tool designed for traders looking to execute large orders without significantly impacting the market. This function allows traders to place orders where only a portion of the total order size is visible to the market, while the rest remains hidden. This article will explore the use of Bybit's hidden entrustment function and discuss the strategies that are suitable for leveraging this feature.

Understanding Hidden Entrustment on Bybit

Hidden entrustment on Bybit allows traders to split a large order into smaller, visible portions, with the rest of the order remaining concealed. For example, if a trader wants to buy 100 BTC but only wants to show 10 BTC at a time, the hidden entrustment function can be used to achieve this. The visible portion of the order is filled first, and once it is executed, the next portion of the hidden order becomes visible until the entire order is filled.

This function is particularly useful for traders who wish to avoid slippage and market impact. When large orders are placed openly, they can cause significant price movements, which can be detrimental to the trader's position. By using hidden entrustment, traders can minimize their market footprint and execute large trades more efficiently.

How to Use Hidden Entrustment on Bybit

To use the hidden entrustment function on Bybit, follow these steps:

• Log into your Bybit account and navigate to the trading interface.
• Select the contract you wish to trade.
• Click on the "Order" tab and choose "Limit Order."
• Enter the total order size you want to execute.
• Set the visible size to the portion of the order you want to be visible to the market.
• Set the price at which you want the order to be executed.
• Submit the order and monitor its execution.

By following these steps, you can effectively use the hidden entrustment function to manage your trades on Bybit.

Strategies Suitable for Hidden Entrustment

Several trading strategies can benefit from the use of hidden entrustment on Bybit. Here are some of the most effective ones:

1. Large Volume Trading

Traders dealing with large volumes can use hidden entrustment to minimize market impact. By breaking down a large order into smaller, visible portions, traders can avoid causing significant price movements that could lead to unfavorable execution prices.

2. Scalping

Scalpers, who aim to profit from small price movements, can use hidden entrustment to enter and exit positions without alerting other market participants. This can help scalpers maintain a competitive edge and execute trades at more favorable prices.

3. Arbitrage

Arbitrage traders, who exploit price differences between different markets, can use hidden entrustment to execute large orders without affecting the market. This can help them capture arbitrage opportunities more effectively and minimize the risk of price slippage.

4. Market Making

Market makers, who provide liquidity to the market by placing buy and sell orders, can use hidden entrustment to manage their inventory without revealing their full position. This can help them maintain a balanced book and minimize the risk of being front-run by other traders.

Benefits of Using Hidden Entrustment

The use of hidden entrustment on Bybit offers several benefits to traders:

• Reduced Market Impact: By only showing a small portion of the total order, traders can minimize the impact of their trades on the market, leading to better execution prices.
• Increased Anonymity: Hidden entrustment allows traders to maintain a level of anonymity, as other market participants cannot see the full size of their orders.
• Improved Order Execution: By breaking down large orders into smaller, visible portions, traders can improve the chances of their orders being filled at the desired price.

Risks and Considerations

While hidden entrustment can be a powerful tool, it is important for traders to be aware of the potential risks and considerations:

• Partial Fills: Since only a portion of the order is visible, there is a risk that the entire order may not be filled if the market moves against the trader.
• Increased Complexity: Managing hidden orders can be more complex than managing regular orders, requiring traders to closely monitor their positions and adjust their strategies accordingly.
• Potential for Front-Running: Although hidden entrustment reduces the risk of front-running, it is not entirely eliminated. Traders should be cautious of other market participants who may attempt to exploit their hidden orders.

Practical Examples of Hidden Entrustment

To illustrate the use of hidden entrustment, consider the following examples:

• Example 1: A trader wants to buy 500 ETH but only wants to show 50 ETH at a time. They set up a hidden entrustment order with a total size of 500 ETH and a visible size of 50 ETH. As each 50 ETH portion is filled, the next portion becomes visible until the entire order is executed.
• Example 2: A market maker wants to maintain a balanced book without revealing their full position. They use hidden entrustment to place buy and sell orders with only a small portion of the total size visible to the market. This allows them to manage their inventory more effectively and minimize the risk of being front-run.

Frequently Asked Questions

Q1: Can hidden entrustment be used for all types of orders on Bybit?

A1: Hidden entrustment is typically available for limit orders on Bybit. It is not available for market orders, as market orders are executed immediately at the best available price.

Q2: Is there a minimum or maximum size for hidden entrustment orders on Bybit?

A2: The minimum and maximum sizes for hidden entrustment orders on Bybit may vary depending on the specific contract being traded. Traders should check the contract specifications on Bybit's platform for the most up-to-date information.

Q3: Can hidden entrustment orders be canceled or modified once placed?

A3: Yes, hidden entrustment orders on Bybit can be canceled or modified at any time before they are fully executed. Traders can access the order book on Bybit's platform to manage their hidden orders.

Q4: How does Bybit ensure the fairness and transparency of hidden entrustment orders?

A4: Bybit ensures the fairness and transparency of hidden entrustment orders by maintaining a strict order matching engine that prioritizes orders based on price and time. Additionally, Bybit's platform provides real-time data and order book information to all users, ensuring that hidden orders are executed fairly and transparently.