Order types: stop-market, stop-limit, post-only and reduce-only

Three separate events

Submission, activation and execution are different events. A conditional order can exist without being active on the order book. Its trigger may reference last, mark or index price depending on the venue and order configuration. After activation, available liquidity and the resulting order type determine whether it fills and at what price.

Market and limit mechanics

A market order seeks available liquidity subject to venue protections; it does not guarantee the displayed last price. A limit order constrains the worst acceptable price. A buy limit above the best ask can execute immediately and take liquidity. A remaining portion can rest on the book. The same order can therefore produce different fee treatment across its fills.

Stop-market versus stop-limit

A stop-market activates a market-style execution request. A stop-limit instead submits a limit order after its trigger. Hypothetical sell stop: trigger $95, limit $94. If available bids jump from $96 to $92, the limit may remain unfilled. A market-style order might fill below $95. Neither mechanism guarantees a $5 maximum loss from a $100 entry.

Post-only is an execution condition

Post-only instructs the venue not to take liquidity immediately. A marketable order is normally rejected, cancelled or adjusted according to venue rules. It can still fail to fill later. Maker status is not synonymous with choosing a limit order, and a displayed maker fee is not a promise that every submitted limit receives that rate.

Reduce-only and position direction

Reduce-only is intended to reduce existing exposure rather than open a new reverse position. A close order left behind after another exit can otherwise create unexpected exposure. Venues differ in how they resize, reject or cancel reduce-only orders. Check one-way versus hedge mode and whether the instruction refers to a specific position side.

Time in force and partial fills

GTC generally rests until filled or cancelled, subject to platform rules. IOC permits immediate available execution and cancels the remainder. FOK requires the specified immediate full execution or cancellation. Availability varies. A partial fill changes the remaining quantity and average execution price; reading only the original order price can misstate actual cost.

Build an execution record

For a hypothetical order, write the reference price, trigger, limit, quantity, time in force and reduction condition. Then record each fill, its price, quantity and fee. Compare the weighted average execution with the trigger. A cancellation acknowledgement and a fill can cross in time, so reconcile the final order and trade history before submitting a replacement.

Try a gap scenario

Use the order-book guide and trading-cost calculator alongside the exercise. Ask separately whether the order activates, whether it can trade within its price constraint, and whether any remainder survives. No real order is sent here. The example explains mechanics rather than selecting an order type for a live position.