Ostium Documentation
  • 👋Welcome to Ostium
  • Getting Started
    • 👁️Overview
    • 🎯Introduction: Our Thesis
    • 💾Glossary
  • Ostium Trading Engine
    • 🏍️Overview
    • 📖Opening Trades
    • 🥅Holding Trades
    • 📘Closing Trades
    • 📹Step-By-Step Tutorial
      • Connecting to Ostium
      • Fund Wallet/Account
      • Opening a Trade
      • Editing a Trade
      • Closing a Trade
    • 📁Order Types
  • 📈Stocks: Day Trading
  • Shared Liquidity Layer
    • 🏦Overview
    • 💦Liquidity Buffer
    • 📊Market Making Vault
      • Deposit
      • Withdraw
      • OLP token
    • ⁉️Risks
  • Supporting Infrastructure
    • 🏗️Overview
    • 🔮Price Oracle
    • 💻Automations
    • 💾API & SDK
  • Security
    • 🔐Smart Contract Audits
    • 💰Economic Audit
  • LEGAL
    • Terms of Use
    • Disclaimer
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  • Overview
  • Open Trade Orders
  • Close Trade Orders
  • Summary
  1. Ostium Trading Engine

Order Types

A comprehensive guide to Ostium's seven order types, their triggering mechanisms, and execution behaviors.

Overview

Ostium supports seven distinct order types designed to provide traders with execution experiences similar to traditional markets. These order types are categorized into two fundamental execution mechanisms:

  1. Market Orders — Triggered by the mid-price and executed at the bid or ask price

  2. Limit Orders — Triggered and executed at the bid or ask price selected by the user

Open Trade Orders

Ostium supports three types of orders for opening positions:

Open Market

  • Trigger: Most recent mid-price (immediate execution)

  • Execution: At bid/ask price

  • Classification: Market order

  • Behavior: Order is triggered immediately after the request is received onchain

  • Rationale: This is a textbook market order, providing immediate execution at the current market conditions

Open Limit

  • Trigger: Execution price (bid/ask) crossing user's limit price

  • Execution: At the execution price that crossed the limit

  • Classification: Limit order

  • Behavior: Ensures execution only occurs when the trade can be filled at the limit price chosen by user or better

  • Rationale: The mid-price crossing the limit is insufficient; execution only occurs when the actual trade price (bid/ask) reaches the limit, ensuring the user gets their desired price or better

Open Stop

  • Trigger: Mid-price crossing user's stop price

  • Execution: At bid/ask price

  • Classification: Market order

  • Behavior: Functions as a market order once triggered

  • Rationale: Follows market conventions where traders expect stop orders to be triggered as market orders. Traders can use limit orders instead if they want to ensure execution at specific prices

Close Trade Orders

Ostium supports four types of orders for closing positions:

Close Market

  • Trigger: Most recent mid-price (immediate execution)

  • Execution: At bid/ask price

  • Classification: Market order

  • Behavior: Equivalent to Open Market order

  • Rationale: Provides immediate position closure at current market conditions

Take-Profit (TP)

  • Trigger: Execution price (bid/ask) crossing user's TP price

  • Execution: At the execution price that crossed the TP

  • Classification: Limit order

  • Behavior: Ensures that execution only occurs when the expected gains can be realized

  • Rationale: Limit order architecture is ideal for TP orders as it ensures execution only occurs when the trader's expected profit can be guaranteed, aligning with market conventions

Stop-Loss (SL)

  • Trigger: Mid-price crossing user's SL price

  • Execution: At bid/ask price

  • Classification: Market order

  • Behavior: Optimized for filling during rapid price movements, may result in greater losses than anticipated

  • Rationale: Market orders are used because stop losses need to fill reliably during volatile price movements when spreads widen. Using limit orders could cause premature triggering during price wicks since bid-ask volatility typically exceeds mid-price volatility

Liquidation

  • Trigger: Mid-price crossing the calculated liquidation price

  • Execution: At bid/ask price

  • Classification: Market order

  • Behavior: Calculated internally based on margin requirements

  • Rationale: Similar to SL orders, using market orders for liquidations prevents premature liquidations during price volatility. Margin requirements in Ostium's liquidation backstop mechanisms already account for the risk of this approach

Summary

Order Type
Classification
Trigger
Execution

Open Market

Market Order

Mid-price (immediate)

Bid/Ask

Open Limit

Limit Order

Execution price crossing limit

Execution price

Open Stop

Market Order

Mid-price crossing stop

Bid/Ask

Close Market

Market Order

Mid-price (immediate)

Bid/Ask

Take-Profit

Limit Order

Execution price crossing TP

Execution price

Stop-Loss

Market Order

Mid-price crossing SL

Bid/Ask

Liquidation

Market Order

Mid-price crossing liquidation price

Bid/Ask

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Last updated 1 month ago

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