Range Order

Powered by the concentrated liquidity algorithm, users can conveniently achieve a lot of advanced trading strategies that are infeasible in AMM DEXes.

Through the creation of a liquidity position with a designated price range set alongside the spot price, liquidity providers (LPs) have the ability to offer their liquidity using a single-sided asset. This innovative feature enables LPs to emulate the functionality of limit orders, a common occurrence in traditional order book markets or centralized exchanges (CEX). However, there's a distinction: a limit order is established with a specific predetermined buy or sell price and may be filled at some point in the future. In contrast, a single-sided liquidity position order in a concentrated liquidity protocol is equipped with a price range.

Upon the spot price entering the pre-set range of the position, continuous token swaps are triggered within that position. If the price entirely surpasses the established range, all initial assets are exchanged for the target assets, which can then be withdrawn by the LP to close the order. This particular order mode is referred to as range orders.

Unlike swappers, the individuals placing range orders are liquidity providers, making them the makers in this context. They earn fees when a range order is executed. By strategically creating liquidity positions, LPs can effectively engage in buying at market dips and selling during rallies, mirroring the actions of professional traders. Simultaneously, they accrue transaction fees, enhancing their overall earning potential.

Order Types Supported by Range Order

Although the range order trading is quite similar to limit orders in orderbook market, there are still certain differences due to the underlying mechanism of concentrated liquidity protocol. What can be supported by concentrated liquidity range order includes take-profit orders and buy-limit orders.

Take-Profit Orders

For example, the current price of a BTC-USDC pool is 20,000 USDT/BTC and you want to sell your BTC for USDC when BTC price reaches 21,000 USDT/BTC. This is feasible by placing range orders because the price space above the current price is fully denominated in the higher-valued token in a concentrated liquidity pool. You can open a position with a narrow price range like 21,000-21,001 USDC/BTC and add your BTC into the pool. Your order will be filled if the price keeps increasing and crosses your liquidity position.

Buy-Limit Orders

For example, the current price of the BTC-USDT pool is 20,000 USDT/BTC. You predict that the BTC price will rebound if it drops to 19,000, so you plan to buy some BTC with USDT at the price of 19,000. It can be achieved by range orders because the space below the current price is denominated in the lower-valued asset, USDC. You can simply create a position with a price range like 19,000-19,001 USDT/BTC. Your BTC will all be swapped into USDT when the spot price drops and crosses your position price range.

Position Management

One thing to note is that to ensure your range order is completely filled, you need to withdraw your position assets in time after your position range is crossed in case that the spot price re-enters the price range. This can be handled manually or be managed with the help of a third-party position manager protocol that has integrated Rabbit Inu’s smart contract.

Besides, it is up to liquidity providers on how to set the price range of a range order position. Setting a wider price interval may help you earn more transaction fees if price fluctuation is intense within your position range, while you need to bear a higher risk that your order cannot be completely filled if the price reserves before it crosses your full range.