Chase Limit Order is a limit order placed at the best bid or ask that dynamically adjusts its entry price to match changing market conditions until the order is filled, canceled, or reaches a maximum chase distance.
Chase Limit Order is more effective for traders seeking to execute big orders as limit orders while minimizing waiting time and potential slippage. These are some advantages of using Chase Limit Order:
1. Swift Execution: Chase Limit Order allows traders to swiftly enter the market in maker order, minimizing the time spent waiting for favorable price levels.
2. Reduced Slippage: Chase Limit Order helps mitigate the risk of slippage and approaches desired entry price as much as possible by dynamically tracking the best ask/bid.
3. Arbitrage Opportunities: Chase Limit Orders create potential arbitrage chances by closely tracking market movements, enabling traders to profit from price disparities between markets or trading pairs.
How Does Chase Limit Order Work?
With Chase Limit Order, traders can set the Chase Price at Ask1/Bid1 or define a fixed distance from Ask1/Bid1. The distance, represented in price or ratio, is to be maintained between the Ask1/Bid1 and the Order Price. The platform then continuously adjusts the Chase Price to ensure the preset Chase Price is maintained until the order is either filled, canceled, or reaches the maximum chasing distance.
A Maximum Chase Distance can be set in value or percentage. Once the Maximum Chase Distance is reached, the order will stop chasing the market and remain at the current price. If you set a Trigger Price for your chase limit order, the strategy will be triggered when the last traded price reaches this value.
There are a few scenarios where traders can explore the flexibility of a Chase Limit Order.
Scenario 1: Chase Ask1/Bid1
In the scenario of Chase Ask1/Bid1, traders are not bound by predefined conditions such as maximum chasing distance. Instead, the order will persistently track the market price, adjusting as it moves until the order is either successfully filled or canceled.
Here is an example. Let’s say a trader places a buy Chase Limit Order with a quantity of 20,000 ABC at the current Bid1 price of 0.00123 USDC. Upon order placement, the market price and Bid1 price shift to 0.00124 USDC, the limit price of the Chase Limit Order is then updated to 0.00124 USDC to match the new Bid1 price and await execution.
If the trader sets the maximum chasing distance to 0.00005 USDC, and the maximum chasing price to 0.00128 USDC, the changes in Limit Price are as follows:
Scenario 2: Chase Distance From Ask1/Bid1
Traders are also able to place a Chase Limit Order at a fixed distance, in price or ratio, from Ask1/Bid1. When the market price and limit price converge, the Chase Limit Order remains the same. However, if the gap between them widens, indicating a less favorable price, the limit price will be adjusted to a new price point at the predefined distance from Ask1/Bid1.
For example, a trader places a buy Chase Limit Order of 1,000 ABC with a Chase Distance of 2.5% of the market price. The market price at the time of order placement is 0.00120. A limit order will be placed with an order price of 0.00120 USDC*(100%-2.5%)=0.00117 USDC.
The table below illustrates how the Chase Limit Order price adjusts as the market price fluctuates to find the best ask/bid price within the predefined distance.
Notes:
— Each trader can place one Chase Limit Order for each symbol on each side (buy/long or sell/short). The maximum number of distinct symbols of open Chase Limit orders is 10 and the maximum number of open Chase Limit Orders allowed per UID is 20.
— The minimum Chase Distance is 0.01%, and the maximum Chase Distance is 10% of the LTP, with a precision of up to two decimals.
— All Chase Limit Orders are by default Post only orders to ensure execution as maker order. In cases of significant market volatility, if your order is rejected five times due to the post-only condition, the strategy will be canceled.