What is a post-only order type?
A ‘post-only’ order is a conditional limit order that serves to add liquidity to the order book. In a post-only environment, your order will exist as a limit order on the order book. No orders will be matched and filled during this time. All taker orders (eg market orders or limit orders that cross the spread) will be rejected. Placed orders can be canceled in post-only mode.
Independent Reserve’s implementation
Independent Reserve will usually enforce post-only orders when a new cryptocurrency is listed on our exchange. This post-only period usually lasts 2 days and will allow customers to place orders on the order book without fear of accidentally making an unwanted trade – allowing the depth of the order book to build before trading commences.
At this stage, post-only orders cannot be enabled or disabled by the customer.
A market maker
Market makers provide liquidity and depth to the order book by creating limit buy or sell orders.
A market taker
Market takers accept the orders made by market makers. They cross the spread and buy or sell directly into the market maker’s limit orders.
Crossing the spread
The “spread” is the price difference between the highest buy order (bid) and the lowest sell order (offer). Crossing the spread refers to selling directly into the highest bids, or buying directly into the lowest offers. As an example, if the highest bid for a cryptocurrency is $100, and the lowest offer is $110, then the spread is $10.
If you create a buy limit order with the bid price of $110 or higher, then this order will cross the spread, as it will immediately buy from the lowest offer price.
Likewise, if you create a sell limit order with the offer price of $100 or lower, then this order will cross the spread as it will immediately sell to the highest bid price.
Market orders by definition will cross the spread, as they are price agnostic and will attempt to trade the specified volume of crypto at the best possible price.