I. What is Reduce Only?
Reduce Only order is a type of order that allows to reduce the position size only, ensuring that the position will not increase. When placing an order, users can select the Reduce Only option. After the order is filled, if it would result in an increase in the position size, the system will automatically reduce the order amount or cancel the order.
II. Main Feature
Reduce Only is primarily used for taking profits and preventing unnecessary positions when the market reverses after hitting the stop-loss or liquidation price.
Example:
Suppose the current BTC price is $10,000, and you hold 10 conts of BTCUSDT long positions. You set a stop limit order at $8,000 and a limit order at $15,000 to take profit/partially take profit.
Scenario 1: Without Reduce Only
If the BTC price drops and triggers the stop-loss order, the 10 conts of BTCUSDT long positions will be closed. Subsequently, if the BTC price rebounds and surpasses $15,000, the limit take-profit order may be filled, resulting in an unintended opening of 10 conts of BTCUSDT short positions.
Scenario 2: With Reduce Only selected
If the BTC price drops and triggers the stop-loss order, the original take-profit order will be automatically canceled, thereby avoiding any unintended reverse positions.
III. Notes
1. Reduce Only is a supplementary option for existing positions to ensure that only position closure occurs without unintentional position increase. If there are no existing positions, all Reduce Only orders will be directly rejected and cannot be placed, regardless of whether there are open orders in the account.
2. If the amount of a new Reduce Only order exceeds the current position size, the system will automatically reduce the position size.
3. Reduce Only orders can only be set under the One-Way position mode and are not supported in the Hedge mode or Multi-Position mode.
4. Position closure orders inherently have the Reduce Only feature and have execution priority.