Limit Orders
Powered by Plasma.Finance. Guideline of using Limit Orders on the PlasmaSwap DEX.

Using Limit Orders on PlasmaSwap AMM

We recently released an industry-first Limit Order functionality on our PlasmaSwap DEX, solving one of the features that many AMM style DEXs have been lacking. This opens up many new use cases in DeFi trading, allowing more flexibility for traders to trade or swap, and essentially providing a means to implement capital protection and optimized profit-taking in DeFi.
This article will now demonstrate how you can use Limit Orders for different use cases step by step, using PPAY/ETH asset pairs on PlasmaSwap.

A. Placing a Stop Loss order (price below market rate)

Stop Loss is a type of limit order that traders usually use when they want an asset to be sold when it reaches a particular price point somewhere below the current market rate.
Traders usually use this to limit their losses, in case the asset price should fall below a particular level. This a method of capital protection or loss mitigation, to prevent you from losing too much in a market downturn.
In this example, a trader wants to use a Stop Loss to protect their PPAY value in ETH.
  1. 1.
    Go to PlasmaSwap or PlasmaFinance and connect your wallet.
  1. 1.
    Go to the Swap page and select the Limit tab right next to the Market tab.
  1. 1.
    Select the asset you want to implement a Stop Loss for and enter the amount you wish to lock into the order in the SELL field. If you can’t find the asset, simply search for the token and add it first to your wallet. ETH is the asset we will use in this example
  2. 2.
    Next, select the currency/asset you want to receive for selling your ETH. In this example, we use PPAY. An ETH/PPAY rate will now appear that is based on the current market rate. The amount of PPAY you see in the BUY field now is the Output you expect to receive from selling your ETH at this rate.
  3. 3.
    Adjust the Rate to the lowest possible price you are willing to sell your ETH for. The Output value (the Buy field) in PPAY will adjust itself as you adjust the Rate. Alternatively, you can adjust the Output value as the lowest possible PPAY you are willing to receive from selling your ETH. The Rate and Output value are dependent on each other, so will adjust as you change the values of either.
  1. 1.
    A message may appear in this format: “Order XX% below market”. This indicates that the rate you set is a certain percentage below the current market price on PlasmaSwap.
  1. 1.
    Click the Place Order button to place your limit order. When the order confirmation window pops up, click Confirm Order to authorize the order. When confirmed, your limit order is placed! You will then see your order reflected in the Open Orders section below.
  1. 1.
    If the market rate does indeed drop and achieve the rate you specify, AND the Actual Output - gas cost ≥ Output Value, your order will execute. Executed orders will be listed in the Order History section below.

B. Placing a Take Profit order (price above market rate)

Take Profit is a type of limit order that traders usually use when they want an asset to be sold when it reaches a particular price point somewhere above the current market rate.
Traders usually use this to maximize their profits, believing that the asset price has the potential to grow beyond a particular level. This a method of profit optimization, to take full advantage of a possible market upswing.
In this example, a trader wants to use a Take Profit to gain maximum value in ETH from selling their PPAY.
  1. 1.
    Go to PlasmaSwap or PlasmaFinance and connect your wallet.
2. Go to the Swap page and select the Limit tab right next to the Market tab.
  1. 1.
    Select the asset you want to implement a Take Profit order for and enter the amount you wish to lock into the order. If you can’t find the asset, simply search for the token and add it first to your wallet. ETH is the asset we will use in this example
  2. 2.
    Next, select the currency/asset you want to receive for selling your ETH. In this example, we use PPAY. An ETH/PPAY rate will now appear that is based on the current market rate. The amount of PPAY you see in the BUY field now is the Output you expect to receive from selling your ETH at this rate.
  3. 3.
    Adjust the Rate to the desired price you want to sell your ETH for. The Output value field in PPAY will adjust itself as you adjust the Rate. Alternatively, you can adjust the Output value (the BUY field) as the desired PPAY you want to receive from selling your ETH. The Rate and Output value are dependent on each other, so will adjust as you change the values of either.
  1. 1.
    A message may appear in this format: “Order XX% above market”. This indicates that the rate you set is a certain percentage above the current market price on PlasmaSwap.
  1. 1.
    Click the Place Order button to place your limit order. When the order confirmation window pops up, click Confirm Order authorize the order. When confirmed, your limit order is placed! You will then see your order reflected in the Open Orders section below.
  1. 1.
    If the market rate does indeed go up and achieve the rate you specify, AND the Actual Output - gas cost ≥ Output Value, your order will execute. Executed orders will be listed in the Order History section below.

C. Place a Future order (market rate doesn’t exist)

Future order is a type of limit order unique to DEXs that traders usually use when they want to buy an asset yet to be listed on the market, at a price they value this new token.
This is a new use case, and DeFi investors can use this to try and get in early on IDO tokens yet to open Liquidity Pools, predicting a good entry price for them. Or, they may want to get in at a better price than what the listing price is expected to be.
This can be considered a method to optimize early participation in a newly-created market, hoping to benefit later from a price appreciation as the new asset gains traction and value.
In this example, a trader wants to use a Future order to use their PPAY to invest in an upcoming IDO token called XYZ.
  1. 1.
    Go to PlasmaSwap or PlasmaFinance and connect your wallet.
  1. 1.
    Go to the Swap page and select the Limit tab right next to the Market tab.
  2. 2.
    Select the asset you want to implement a Future order and enter the amount you wish to lock into the order. If you can’t find the asset, simply search for the token and add it first to your wallet. ETH is the asset we will use in this example.
  1. 1.
    Next, select the currency/asset you want to buy. In this example, we use SHIB (the memecoin Shiba Inu). Because this market doesn’t exist yet, there will not be a rate appearing until you set it yourself. The amount of SHIB you see in the field now is the Output you expect to receive from selling your PPAY at the rate you want.
Note: If you enter a token that doesn’t show up, you will need to enter the contract address for that token to add it. You will also see this message in the Market section on the left side of the swap settings to indicate there is no market for it yet.
  1. 1.
    Adjust the Rate to the desired price you want to buy SHIBfor. The Output value in SHIB will adjust itself as you adjust the Rate. Alternatively, you can adjust the Output value (the BUY field) as the desired SHIB you would like to buy with ETH. The Rate and Output Value are dependent on each other, so will adjust as you change the values of either.
  2. 2.
    Click the Place button to place your limit order. Then sign the confirmation prompt to authorize the order. When confirmed, your limit order is placed! You will then see your order reflected in the Open Orders section below.
  3. 3.
    If the market actually launches, for example, if SHIB were to launch an IDO on PlasmaSwap, then as soon as the available market rate achieves the rate you specify, AND the Actual Output - gas cost ≥ Output Value, your order will execute. In essence, you will place an advance order for a future IDO or a future market, at a price you expect to hit! Executed orders will be listed in the Order History section below.
And there you have it, the step-by-step guides to place Limit Orders for three different use cases: a Stop Loss, a Take Profit and a Future Order.
In fact, Limit Orders on PlasmaSwap, as a DEX, actually work even better than you would expect than Limit Orders on a regular centralized exchange (CEX) with order books. This is beneficial for the DeFi trader in two ways:
  1. 1.
    Unlike on CEXs where Limit Orders will fill partially, as there are takers, on a DEX, your order will never only partially fill, it will fill completely (100%). Essentially, you aren’t just selling for the price you want, you’re securing a total output value desired in one transaction.
  2. 2.
    Unlike on CEXs, where you will get the entire Output you specify, on a DEX, it’s better. You will receive, as a minimum, the total output value desired, but will in most cases also receive a little more, since orders will execute at a price range equal to or better than what you set.
Last modified 5mo ago