What is a follow-up limit order and how to use it

A limit order is the primary tool for managing price when entering the market. Its enhanced version, known as a tracking limit order, adds intelligent automatic following of the market price. This mechanism allows your order price to dynamically adapt until the order is filled, canceled, or reaches the maximum allowable deviation from the current market quote.

Why traders choose tracking limit orders

When you place a limit order, the price usually becomes fixed. If the market moves quickly, your order may remain unfilled. This is where the power of a tracking order comes into play — it automatically adjusts its price to stay competitive for execution.

The main advantages are threefold. First, rapid market entry: waiting time is reduced because the order constantly approaches the best bid or ask price. Second, minimized slippage: thanks to dynamic price adjustment, you get execution closer to your desired level. Third, arbitrage opportunities: real-time monitoring of quote movements allows you to profit from price gaps between markets or trading pairs.

How the tracking limit order mechanism works

With this tool, market participants have two main options. The first is to set the order at the Ask1 or Bid1 level (the best quoted offer) or specify a fixed distance from these levels. The system continuously monitors quotes and adjusts the order price to keep it current.

The distance between the order price and the current quote can be set as a numerical value or a percentage. There is also a concept of maximum deviation. When this limit is reached, the order stops following the market and is fixed at the current price. If you set a trigger price, the strategy activates only when this level of the last executed trade is reached.

Scenario one: automatic tracking of Ask1/Bid1

Imagine a trader places an order to buy 20,000 ABC tokens at the current Bid1 price of 0.00123 USDC, without setting a strict follow limit. The order will adapt until it is filled or canceled.

If the user sets a maximum deviation of 0.00005 USDC and a maximum price of 0.00128 USDC, the dynamics look like this:

In this example, the order automatically moved from 0.00123 to 0.00127, but when the gap exceeded the allowable limit, it stopped at 0.00128.

Scenario two: tracking at a fixed distance from Ask/Bid

An alternative approach is to place a limit order at a certain percentage or numerical distance from the current quote. If the market price falls (becomes less favorable for you), the order price adjusts upward to maintain the set offset.

Suppose an investor wants to buy 1000 ABC tokens with a 2.5% spread from the market at the current price of 0.00120. The initial order price = 0.00120 × (100% - 2.5%) = 0.00117 USDC.

If the market price changes, the order responds as follows:

When the market drops to 0.00119, the order remains in place since the spread is already sufficient. When the price rises to 0.00125, the order moves up to 0.00122, maintaining the 2.5% offset.

Practical limitations and parameters of limit orders

The system sets clear boundaries for using this tool. Each participant can place one tracking limit order per trading symbol on each side (buy or sell). A maximum of 10 different trading pairs can be active simultaneously, and the total open orders are limited to 20 per UID.

The minimum distance from the last trade price is 0.01%, the maximum is 10%, with a precision of two decimal places. By default, all such orders operate as Post Only orders, ensuring they are placed as maker orders rather than taker orders.

When the system cancels your order

In high market volatility conditions, the system may reject your order due to Post Only restrictions. If this happens five times in a row, the tracking strategy will be automatically canceled. This is a safeguard against an endless cycle of rejections in extreme market conditions.

Understanding the mechanics of a tracking limit order is a key skill for active traders. This tool combines the predictability of a limit order with the market adaptability of dynamic execution, making it an ideal choice for large positions where speed and slippage minimization are critical.