How to Use a Follow-Through Limit Order for Effective Trading

The dynamic cryptocurrency market demands traders to make quick decisions and utilize tools that adapt to constantly changing conditions. A trailing limit order is one such tool, allowing automatic adjustment of your order’s price level in accordance with market movements. This mechanism is especially useful when trading large volumes, where each percentage point of price movement significantly impacts profitability.

Key Advantages of Trailing Limit Orders

Traders choose trailing limit orders primarily because of their ability to respond promptly under favorable conditions. First, fast market entry is achieved because the system continuously maintains the order at an optimal bid or ask level. Traders don’t waste time waiting for better quotes — the order automatically follows the best price points.

Second, this approach significantly reduces the risk of unforeseen losses during execution. Since the limit order’s price is dynamically rechecked against the current Ask/Bid, the likelihood of executing a trade at a worse-than-desired price is greatly diminished. Traders receive results that closely match their predefined levels.

Third, new opportunities for arbitrage arise. Careful monitoring of quote movements across different trading pairs allows experienced traders to identify and capitalize on price discrepancies. Automated order tracking greatly simplifies executing such strategies.

How the Tracking Order Works

The operation of a trailing limit order is based on two key components: the current market price and a specified distance between it and your order level.

When placing such an order, traders can choose one of two approaches. The first is to fix the order at the best current ask (Ask1) or bid (Bid1) level at a specific moment. The second is to set a fixed or percentage distance from the current quote. The distance at which your order “hangs” can be specified as a numerical value or expressed as a coefficient.

After placing the order, the platform begins continuously rechecking its position relative to market movements. If the market price moves favorably, your order’s price is automatically updated. If the market moves unfavorably, the order remains at the set level within the maximum allowable distance.

The maximum tracking distance parameter is particularly important. It can be set as an absolute value or a percentage. Once the limit order reaches this threshold away from the current market price, the system stops its automatic adjustment, and the order “freezes” at that level.

If you specify a trigger price, the strategy automatically activates when the last executed trade reaches your set value. This automates entering the market at the desired moment.

Practical Application Examples

Scenario 1: Following the best price without distance restrictions

Imagine a trader places an order to buy 20,000 ABC tokens at the current Bid1 price of 0.00123 USDC. At this stage, no strict tracking distance is set — the order will follow the market price until execution or cancellation.

Market conditions develop favorably: the price rises to 0.00124 USDC. The system automatically updates your order’s price to the new Bid1 level (0.00124 USDC), increasing the chances of quick execution. However, the trader has set a maximum tracking distance of 0.00005 USDC and a maximum price ceiling of 0.00128 USDC.

Further development: the market price continues to rise and reaches 0.00127 USDC. The new Bid1 price also becomes 0.00127 USDC. The distance between the order and Bid1 is 0.00004 USDC — less than the maximum allowed, so the order updates to 0.00127 USDC.

Then, the price jumps sharply to 0.00131 USDC. The new Bid1 becomes 0.00131 USDC, and the distance is 0.00008 USDC — exceeding the allowed limit. The system stops following, and the order remains fixed at the maximum set level of 0.00128 USDC.

Scenario 2: Tracking with a fixed percentage margin

A trader places an order to buy 1,000 ABC tokens with a tracking distance of 2.5% of the current market price. At the time of order placement, the market price is 0.00120 USDC.

The initial order price is calculated as: 0.00120 × (100% − 2.5%) = 0.00117 USDC.

Now, observe how the order reacts to market fluctuations:

• If the market price drops to 0.00119 USDC: the new Bid1 becomes 0.00119 USDC, and the required distance of 2.5% is 0.00002975 USDC. Since the order is already placed at 0.00117 USDC, which corresponds to a greater than 2.5% distance, the order does not change, as the current level is already optimal.

• If the market price rises to 0.00125 USDC: the new Bid1 is 0.00125 USDC, and 2.5% of that is 0.00003125 USDC. The system updates the order to 0.00122 USDC (0.00125 − 0.00003125) to maintain the set corridor.

Parameters and Limitations for Trailing Limit Orders

Using trailing limit orders is subject to certain technical constraints:

• Each trader can place one trailing limit order per symbol on each side (buy or sell). However, the total number of open positions per symbol is limited to 10, and the total number of active trailing orders per account cannot exceed 20.

• The minimum distance from the current price is 0.01%, and the maximum is 10%, with calculations precise to two decimal places. These parameters provide flexibility for various trading strategies.

• By default, all trailing limit orders are created as Post Only orders, ensuring they are added as liquidity (maker orders). This feature is important for maintaining strategy integrity.

Important Notes for Successful Trading

When working with trailing limit orders, it’s essential to consider the system’s behavior during high volatility. During significant market swings, your order may be rejected multiple times due to Post Only conditions. If the system rejects the order five consecutive times, the strategy will automatically stop and cancel the order.

This means traders should carefully select tracking parameters and order sizes during periods of increased market activity. Regularly review and adjust your orders as market conditions change.

Proper use of trailing limit orders requires understanding the interaction between market dynamics, tracking parameters, and your trading strategy. When used within set limits and with attentive monitoring, this tool can be a powerful aid in achieving trading goals.