Reduce‑only orders on The Graph perpetuals let you cut exposure without opening new positions.
The Graph’s perpetual contracts offer leveraged exposure to GRT, but traders often need to trim risk without flipping direction. Reduce‑only order type solves that by guaranteeing any execution only shrinks the existing position, never adds to it. This behavior aligns with disciplined risk management in volatile markets.
Key Takeaways
- Reduce‑only orders only execute when they offset an existing position.
- They cannot open a new long or short; they strictly reduce size.
- The feature helps manage margin usage and prevents accidental over‑exposure.
- Execution price still follows market depth, so slippage can occur.
What Is a Reduce‑Only Order?
A reduce‑only order is a special order flag that tells the matching engine to reject fills that would increase the absolute size of a position. According to Investopedia’s definition of a reduce‑only order, the order is designed solely to lower exposure, not to open new trades. On The Graph perpetual platform, this flag is applied to limit or market orders, ensuring that any transaction reduces net position size.
Why Reduce‑Only Orders Matter
Leveraged trading amplifies both gains and losses. A single mis‑click can turn a well‑hedged portfolio into an over‑leveraged one. By using reduce‑only orders, traders lock in profit or cut loss without worrying about unintended direction changes. This aligns with guidelines from the Bank for International Settlements on margin risk, which stress the importance of precise exposure control.
How Reduce‑Only Orders Work
When a reduce‑only order is submitted, the engine checks the current position before any match. The execution logic follows a simple rule:
New Position = sign(P) × max(|P| − Q, 0)
Where P is the current position (positive for long, negative for short) and Q is the order quantity. If Q exceeds the absolute size of P, the excess is ignored and the position becomes zero. The matching process can be
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