- Crypto markets are a paradise for swing traders who love volatility
- Unfortunately, few exchanges offer the tools needed to make these trades easy and effective.
- Now, thanks to bracket orders, experienced can open various positions from one Phemex account.
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Crypto markets are renowned for their volatility. It’s common to see prices swing 10% in a single day. Because of this, the moves are large, making swing trading one of the more effective strategies.
Play the Swings, and Everything in Between
For the uninitiated, a swing trade is a position taken to capture a directional move for days or even weeks. However, crypto is also a scalpers paradise. This means trading price ranges on shorter time frames – held between a few seconds and a few hours – is just as profitable.
Both of these strategies will lead to massive profitability if executed correctly. But traders often face a dilemma in choosing one or the other. The reason being they have to silo their capital and operate two separate accounts.
This is because the exchange will treat the scalps as a position reduction rather than a fresh position.
For example, Chad buys 5,000 BTC long contracts at $10,200 and is looking to exit only when the price breaches $12,100. But once prices hit $11,500, Chad believes a short correction is due and wants to scalp the move.
If Chad purchases 600 short contracts at $11,500, it will not be treated as a separate short. The exchange will see this as Chad taking profits and reduce his long position from 5,000 contracts to 4,400 contracts.
To overcome this, the only option is to set up a separate account on the same exchange or an account on a different exchange. It becomes tedious to manage various accounts.
Traders that find themselves wanting to execute such a trade but don’t because of the complexity will be pleased with Phemex’s latest product – bracket orders.
With bracket orders, traders can play the swings and the scalps, all from one single account.
Using Bracket Orders
Consider the case of Chad again. Except now, he’s trading on Phemex and has access to bracket orders.
Chad has his 5,000 long contracts on BTC, and come $11,500, he’s ready to scalp a short until $11,200. All he has to do is submit a bracket order, entering at market price with stop loss, and take profit orders.
Phemex considers this short position to be completely different and doesn’t reduce Chad’s long position. It simply gives him the option to play the small ranges in between without fragmenting his capital across multiple trading accounts.
Chad now has 5,000 BTC long contracts and also 600 short contracts. He sets a defined take profit at $11,000 and a stop loss at $11,600. To reiterate, his long and short are entirely different positions on the same account. Traders can only do this on Phemex and Binance using hedge mode.
However, this only begins to scratch the surface of what bracket orders can do. Traders who exclusively scalp will find this to be a useful tool as well. It also helps take advantage of Phemex’s fee rebates for maker orders.
Anyone who adds liquidity to Phemex’s orderbook is given a rebate of 0.025%. Simply put, one can earn a fee for providing liquidity to a market book. This allows anyone, regardless of size, to be a profitable market maker on Phemex.
Bracket orders augment this strategy, allowing a maker to set up a bunch of orders quoting different prices. The inclusion of an innate stop loss and take profit automates this, turning market making into a rather passive strategy if executed correctly.
Last but not least, bracket orders are a platform for manual traders to implement strategies on par with algo traders. Algorithms help traders automate their entries and exits when a specific condition is met. But not everyone has the technical chops to develop and deploy trading algorithms.
Many manual traders implement sound logic and can spot a great trade, but they are at a severe disadvantage because they will always be front-run by algo trades. Bracket orders put these manual traders on parity with algos by letting them set up a range of orders at different levels.
Effectively, bracket orders allow your run-of-the-mill day trader to use logic and implement a high-frequency trading strategy.
A Developing Playground for Traders
Phemex launched less than a year ago but has quickly grown into one of the most liquid crypto exchanges. The BTC-USD contract alone routinely records over $5 billion in monthly volume.
Bracket orders serve to enhance the user experience and are an indication of the exchange’s focus on building a product that helps traders.
Whether Phemex will be able to steal market share from industry leaders like Binance, Coinbase, and BitMEX remains to be seen, but they certainly have a fighting chance.
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