Basic trading principles
Before you get going, let’s get familiar with some of Scalpex platform’ trading basics.
What is a Trade?
A trade always happens between a Market Maker and a Market Taker. A Market Maker is the one whose order appears in the orderbook. The Market Taker, on the other hand, has the matching order. When the orders have matched (meaning that they have reached a common price) – a trade happens. It’s wise to note that Market Maker commissions are different from Market Taker commissions. There are cases when the Market Taker pays an elevated commission. You can look at it further in the commissions section.
Now, when it comes to positions, you are free to open long and short positions on any trading contracts of your choice. Whenever you trade, the size of your trading position changes. Let’s take a closer look.
Long & Short Positions
A long position means that a trader believes that the price of the derivative is about to increase. Hence, he places his bet on price growth and buys. A short position, on the other hand, means that a bet is placed on price reduction – basically, it’s a sell. For example:
Let’s assume that Bitcoin’s current price is 10,000. Bob believes that the price will go up. So, Bob posts a buy order and opens a long position. Sally, on the other hand, believes that the price will fall. So, she sells and opens a short position. If Bob is right and the price indeed increases – he profits and Sally loses. And vice versa.
The Scalpex platform allows Limit Orders and Market Orders.
A Limit Order has a fixed price. Limit orders can only be filled at a price better or equal to the limit price. If the limit order can be executed at the time of posting, it is considered a market taker and is charged a market taker fee. If the order can not be executed at the limit price, however, it enters the order book with the status of NEW and if it gets filled – it is considered a market maker. Most often, the execution of this order bears lower commissions and may offer a rebate (check contract specifications for details).
When a limit order is in the order book, you are free to cancel or to modify its price or quantity. Please keep in mind that modification of the limit order price in the order book can lead to its cancellation or to immediate execution at the new price with an additional market taker fee charge.
Order execution occurs if the order book has a matching order. We use a time-priority queue order matching engine. This means that orders are attended to on a first come-first serve basis. Decreasing the order quantity does not influence its position in the queue, but a quantity increase moves the order down to the end of the queue.
When you have an open order (i.e: one that opens or increases a position), the reservation of some collateral from your balance is required. Your available balance may differ from your total balance. Your available balance is the amount of Bitcoins you can actually use to trade or withdraw.
Available Balance = Total Balance – Collateral Balance, where Total Balance includes your Realized P&L (Profit And Loss).
A Market Order, unlike the Limit Order, is executed or cancelled immediately, at current market price and is subject to a market taker fee.
A Stop Order is an order that enters the order book only once the market reaches a certain trigger price (stop price). In the case of a stop order, the trigger price can be specified as either the last price, the mark price or the index price.
Once the trigger price is reached, the stop order will execute as a normal limit or market order.
- Stop Limit Order – Once the trigger price is reached, a limit order will be placed
- Stop Market Order – Once the trigger price is reached, a market order will be placed
Each stop order can have three different statuses during its execution, as follows:
- Untriggered – The trigger price has not yet reached the level to trigger the stop order
- Triggered – The trigger price has been triggered, but the order has not yet been filled
- Filled – The stop order has been triggered and the order has been filled
Please note that the execution of triggered stop orders is not guaranteed at the exact time of triggering. Meaning – once a stop order is triggered, it enters the order book, but in a fast-moving market users can encounter slippage.
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