Post-Only Orders: Minimizing Taker Fees Explained.

1. Post-Only Orders: Minimizing Taker Fees Explained

Introduction

For newcomers to the world of cryptocurrency trading, especially futures trading, navigating the intricacies of order types and exchange fees can be daunting. One powerful technique to reduce costs and improve profitability is utilizing “post-only” orders. This article will comprehensively explain post-only orders, why they are beneficial, and how they function on popular platforms like Binance and Bybit. We will focus on providing a beginner-friendly understanding, prioritizing the essential aspects for new traders. Understanding concepts like leverage (see Leverage Explained for a detailed explanation) is crucial alongside order types, and we'll touch upon how post-only orders fit into a broader trading strategy.

Understanding Market Orders, Limit Orders, and Fees

Before diving into post-only orders, it’s essential to understand the fundamental order types and the associated fees.

• **Market Orders:** These orders are executed immediately at the best available price in the market. While guaranteeing execution, they often result in *slippage* (the difference between the expected price and the actual execution price) and always incur *taker fees*.
• **Limit Orders:** These orders allow you to specify the price at which you want to buy or sell. They are only executed if the market reaches your specified price. Limit orders can be *maker* orders (adding liquidity to the order book) or *taker* orders (immediately filling an existing order in the order book).

Now, let's discuss fees. Crypto exchanges charge fees for executing trades. These fees usually come in two varieties:

• **Maker Fees:** Charged when you add liquidity to the order book – essentially, placing a limit order that isn't immediately filled. You are ‘making’ the market.
• **Taker Fees:** Charged when you remove liquidity from the order book – essentially, placing an order (market or limit) that is immediately filled against an existing order. You are ‘taking’ liquidity.

Typically, taker fees are higher than maker fees. This incentivizes traders to provide liquidity (place limit orders) rather than immediately taking it (placing market orders).

What are Post-Only Orders?

A post-only order is a type of limit order that *guarantees* it will be executed as a maker order, avoiding taker fees. The exchange will only execute the order if it can be placed on the order book as a limit order, adding liquidity. If the order would immediately be filled against an existing order (becoming a taker order), the exchange will *cancel* the order instead of executing it as a taker.

This is incredibly valuable for high-frequency traders or those employing strategies that rely on placing numerous orders. Over time, the savings from avoiding taker fees can significantly boost profitability.

Benefits of Using Post-Only Orders

• **Reduced Fees:** The primary benefit is avoiding potentially high taker fees, especially on exchanges with tiered fee structures.
• **Improved Profitability:** Lower fees translate directly into higher potential profits.
• **Discipline:** Post-only orders force you to think critically about your entry and exit prices. You can’t simply "force" an order through at any cost.
• **Strategic Trading:** It encourages a more deliberate and patient approach to trading.

Downsides of Using Post-Only Orders

• **Potential for Non-Execution:** The order may not be filled if the market doesn't reach your limit price. This can be frustrating if you’re trying to enter or exit a position quickly.
• **Requires Patience:** You need to be willing to wait for your order to be filled.
• **Slightly More Complex:** It adds a layer of complexity to order placement compared to simple market orders.

Post-Only Orders on Binance

Binance offers a post-only order type as part of its advanced order options. Here’s how it works:

• **Accessing Post-Only:** When placing a limit order on Binance Futures (or Spot, though it's more beneficial in futures due to higher trading volumes), you will find an option labeled “Post Only”. This is typically located within the order settings.
• **Order Execution:** When "Post Only" is enabled, Binance will only submit your order as a limit order. If it would fill immediately as a taker order, it will be cancelled.
• **User Interface:** The Binance interface clearly indicates whether the order is submitted successfully or cancelled due to the post-only restriction.
• **Fee Structure:** Binance's tiered fee structure rewards high-volume traders with lower maker fees. Combining post-only orders with a lower maker fee tier can lead to substantial savings.

Post-Only Orders on Bybit

Bybit also provides a post-only order functionality, with a slightly different implementation:

• **Accessing Post-Only:** On Bybit, the post-only option is usually found within the “Order Type” selection when placing a limit order. It’s often labeled as “Post Only” or “Only Add.”
• **Order Execution:** Similar to Binance, Bybit will only execute your order if it can be placed on the order book as a limit order.
• **User Interface:** Bybit’s interface provides clear feedback on whether the order was successfully submitted or cancelled as a result of the post-only setting.
• **Conditional Orders:** Bybit also offers advanced conditional order types that can be combined with post-only orders for even more sophisticated trading strategies.

Comparing Post-Only Implementation on Binance and Bybit

| Feature | Binance | Bybit | |------------------|----------------------------------------|-----------------------------------------| | **Access** | Within Limit Order settings | Within Order Type selection | | **Labeling** | "Post Only" | "Post Only" / "Only Add" | | **Cancellation** | Order is cancelled if taker | Order is cancelled if taker | | **UI Feedback** | Clear indication of submission/cancellation| Clear indication of submission/cancellation| | **Advanced Orders**| Available, but less integrated than Bybit| Stronger conditional order integration |

Integrating Post-Only Orders into a Trading Strategy

Post-only orders aren’t a standalone strategy; they are a tool to enhance existing strategies. Here are a few examples:

• **Scalping:** While seemingly counterintuitive, post-only orders can be used in scalping strategies to minimize taker fees on numerous small trades.
• **Range Trading:** Placing limit orders (post-only) at the support and resistance levels of a trading range can capitalize on price fluctuations while avoiding taker fees.
• **Trend Following:** Using post-only orders to enter positions along with a trend can help minimize costs and maximize potential profits. However, you may miss quick entries.
• **Combining with Technical Analysis:** Using indicators like the Ichimoku Cloud (see Ichimoku Cloud Explained) to identify potential entry and exit points, then utilizing post-only orders to execute trades at those levels, can lead to more informed and cost-effective trading.

Important Considerations for Beginners

• **Start Small:** Begin with small order sizes to get comfortable with the post-only functionality.
• **Understand Slippage:** While post-only orders avoid taker fees, be aware of potential slippage if the market moves quickly.
• **Monitor Your Orders:** Regularly check your open orders to ensure they are being placed correctly and aren’t being cancelled excessively.
• **Consider Market Volatility:** In highly volatile markets, post-only orders may have a lower chance of being filled.
• **Don’t Rely Solely on Post-Only:** Market orders still have their place, especially when immediate execution is critical.
• **Risk Management:** Never risk more than you can afford to lose, regardless of the order type. Understand the risks associated with leverage (see The Importance of Leverage in Futures Trading Explained) before using it.
• **Fee Schedules:** Always review the exchange’s fee schedule to understand the maker and taker fee rates.

Advanced Techniques

• **OCO (One Cancels the Other) with Post-Only:** Combine post-only limit orders with OCO orders to automatically cancel one order if the other is filled.
• **Trailing Stop-Loss Orders with Post-Only:** Use post-only orders to enter a position and then set a trailing stop-loss order to protect your profits.
• **Algorithmic Trading:** Integrate post-only orders into automated trading bots to minimize fees and optimize execution.

Conclusion

Post-only orders are a valuable tool for cryptocurrency traders, particularly those focused on minimizing fees and maximizing profitability. While they require a bit more understanding and patience than simple market orders, the potential savings can be significant, especially for active traders. By understanding the functionality on platforms like Binance and Bybit, and integrating them into a well-defined trading strategy, beginners can take a significant step towards more efficient and profitable trading. Remember to start small, practice diligently, and always prioritize risk management.

Recommended Futures Trading Platforms

Platform	Futures Features	Register
Binance Futures	Leverage up to 125x, USDⓈ-M contracts	Register now
Bitget Futures	USDT-margined contracts	Open account

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