Orders and execution: price, fees, slippage

Every order is an instruction to the exchange with conditions. Section 1 introduced the two basic ones: limit and market. Let us look at them more closely, because the order type decides three things: at what price you get in, whether you get filled at all, and how much you pay the exchange.

A limit order is “buy at no more than X” or “sell at no less than X”. It guarantees the price but not the fill. If there is no matching offer on the other side, the order joins the queue at its price and waits. The queue at one price follows “first come, first filled”. So the market can touch your price and leave, and your order stays unfilled — the queue simply never reached it.

A limit order can be filled partially: 0.7 out of 2 BTC bought, the rest waiting. And it can be filled better than its price: place a limit buy “at no more than 80,100” while sellers are already at 80,050, and it immediately buys at 80,050. Such an order fills at once and acts as a taker, even though it is called a limit order. To be sure to remain a maker, exchanges offer a “post-only” flag: if the order would fill immediately, the exchange cancels it.

A market order means “fill now at the best prices available”. It guarantees the fill, not the price. You specify it in quantity (“buy 0.5 BTC”) or in amount (“buy $10,000 worth”). A market order is always a taker. If there is not enough volume at the best price, it walks on — through the following prices until it has collected the full amount (lesson 2).

A stop order sleeps until the price reaches a set trigger price. It is used to limit a loss: a long opened at 80,000 — a sell stop at 79,200. There are two kinds:

• stop-market — once triggered, sends a market order. It will almost certainly fill, but at whatever price is available at that moment — in a sharp move noticeably worse than the trigger;
• stop-limit — once triggered, places a limit order with a set price. The price is no worse than the limit, but if the market jumps past it in one go, the order may not fill at all, and the position stays open.

A take-profit (“take”) is the same on the profit side: long at 80,000, take at 81,000. It is done with a limit order (resting in the queue) or with a trigger that sends a market order. The reduce-only flag forbids the order from opening a new position: if you have already closed the position by hand, the stop will not open an accidental short.

Exchanges compare the trigger with the last trade price or with the mark price (what that is and why — section 12); you can usually choose which in the order.

Limit sells rest in the queue at different prices: a little at the lowest, a little more slightly higher and so on. A market buy takes them from cheapest to dearest: first everything at the best price, then the next price, and so on until it has the full amount. A market sell is the mirror image, taking limit buys from highest to lowest. One order of yours turns into several trades at different prices.

An illustrative example. On offer: 2 BTC at 83,000, 3 BTC at 83,010, 10 BTC at 83,020. A market buy for 6 BTC takes 2 BTC at 83,000, 3 BTC at 83,010 and 1 more BTC at 83,020. After it the last price is 83,020, and 9 BTC remain at 83,020.

The average fill price is not the midpoint between the first and last price, nor the simple average of the levels, but an average weighted by quantity: money paid divided by quantity bought.

(2 × 83,000 + 3 × 83,010 + 1 × 83,020) / 6 = (166,000 + 249,030 + 83,020) / 6 = 498,050 / 6 ≈ 83,008.33.

A simple average of the three prices would give 83,010 — wrong: only 1 BTC of 6 was bought at 83,020, so it carries little weight. The last price (83,020) is not the average either: the last price is where the order ended; the average is what it cost overall.

Slippage is the difference between the price you counted on and the average price you were filled at. “Counted on” usually means the best price at the moment you pressed the button. In the example above: expected 83,000, got 83,008.33 on average — slippage of 8.33 dollars per bitcoin, or 8.33 / 83,000 ≈ 0.01%.

Where it comes from:

• the order is larger than what rests at the best price — it walks through several prices, as in the example;
• the price moved while the order was in flight — fractions of a second pass between decision and fill, and in a fast market others take the best prices in that time;
• a stop-market in a sharp move — it triggers exactly when many are rushing the same way, and there are few opposing orders near the price.

Slippage in money: expected 2,000.0, average fill 2,003.0 — that is 3 / 2,000 = 0.15%. On a $20,000 position that is $30. If the position was opened at ×20 (margin $1,000), those $30 are already 3% of the margin before the price has gone anywhere.

For every trade the exchange charges a fee — a percentage of the position value (quantity × price), not of your margin. There are usually two rates: the maker rate for orders that rested in the queue and were filled, and the taker rate for orders filled immediately. The taker rate is higher: the exchange favours those who bring it ready prices and charges more to those who take them.

The examples below use illustrative rates of 0.02% for makers and 0.05% for takers — roughly the base rates on large derivatives exchanges. Exact rates depend on the exchange, your tier and volume — check them in your exchange's terms.

The fee is paid twice: on entry and on exit. On exit it is charged on the position value at the exit price. If the price barely changed during the trade, a rough rule is: round-trip fee = position value × (entry rate + exit rate).

How far the price must move just to cover fees. It is the sum of the entry and exit rates:

• taker on entry and exit: 0.05% + 0.05% = 0.10%;
• maker on entry, taker on exit: 0.02% + 0.05% = 0.07%;
• maker on both: 0.02% + 0.02% = 0.04%.

For BTC at 80,000 a 0.10% move is 80 dollars. Until the price has moved that far your way, a trade with two market orders is in the red. Slippage comes on top: it is not part of the fee, but it acts the same way — it worsens the entry and exit price.

With leverage this hurdle in percent of price does not change (0.10% stays 0.10%); what changes is its weight in the margin: ×5 — 0.5% of margin, ×20 — 2%, ×50 — 5%, ×100 — 10% of margin per round trip. Anyone who enters and exits with market orders at high leverage often pays the exchange a noticeable share of their money every day.

When slippage is especially large. Three cases come up all the time.

1. An illiquid coin. Few limit orders rest right at the price, and even a modest market order walks through several prices — the example in lesson 2 shows it in numbers.
2. A sharp move. When the price runs fast in one direction, orders near the price are often pulled, and there are fewer on the opposite side. A stop-market triggered in such a minute fills noticeably beyond the trigger.
3. A large order. The larger the amount, the more prices it walks through. Slippage grows faster than the amount: each subsequent part fills at an ever worse price.

A limit order protects against slippage but pays for it with the risk of not being filled. If the price only touched and left, your limit order may have stayed in the queue behind those who joined that price earlier. A market order always fills, but at whatever price is there. Which is better depends on what costs you more in a particular trade — there is no universal answer.

Where you see this in EVA. How many limit orders rest near the price right now is shown by the “Order Book” block on the “Book · Flow” tab (section 3). For large orders that have already gone through, the tooltip says how many trades the order was assembled from and the price range it covered — that is a market order filled across several prices. The terminal itself does not send orders to an exchange: it shows what is happening, while the decision and the execution are yours, on your exchange.