What is a Reduce Only Order?

What is a Reduce Only Order?

A Reduce Only Order is an order that only allows the reduction of a position, in order to ensures that a user’s position will not be unintentionally increased. If a Reduce Only order was to increase the user’s position in any way, it will either be immediately canceled or the contract size will be adjusted to prevent an increase.

Features:

1.     A Reduce Only Order is an order option only serves to reduce a user’s position size. Please do not choose the option when you wish to open a position or increase your position, otherwise it will lead to an order-placing failure.

2.     If a reduce-only order can only be placed less than or equal to the existing open position's contract size, otherwise the order will be automatically reduced or cancelled.

3.     The "close by limit/market price" function available inside the Position tab has the Reduce-only function embedded.

4.     The operation of the function is allowed for PC clients.

Advantages:

Generally, a Reduce Only Order is used in a situation where users want to avoid orders placed being identified as open positions. To simply put it, a Reduce Only Order amounts to adding an additional function to the position a user holds, so as to ensure that the position can only be closed but will not be unintentionally increased.

For example:

You currently hold Buy Long 10 BTCUSD contracts at 10,000 USDT and also sets a stop loss order at 8,000 USDT. You want to sell the contracts by setting a take profit order with a limit price set at 15,000 USDT. The following are 2 examples of setting a Take Profit with and without selecting the Reduce-only order option: 

※ Without Reduce-only Option

If the BTC price rose to 15,000 USDT as expected, you can take profit by selling your 10 BTCUSD long contracts. 

If the Last Traded BTC Price first plunged to 8,000 USDT to trigger the order's stop-loss first and then proceeded to rise back to 15,000 USDT, the previous take profit limit order will likely be fulfilled, causing users to open an unintended position for 10 BTCUSD short contracts at USD 15,000 USDT. 

※ With Reduce-only Option 

Under the same case, even though the Last Traded BTC Price triggers the order's stop-loss first to sell the 10 BTCUSD long contracts, the corresponding take profit limit order at 15,000 USDT will automatically be cancelled due to the reduce only option, thereby ensuring its non-execution to prevent future unintended opening of short positions for 10 BTCUSD contracts.