What is a Reduce-Only Order? Perpetual Futures Position Closing Guide

Suppose you hold 2 perpetual contract long positions and place a limit order to sell 2 contracts, intending to close the position when the price reaches that level. Later, you manually close 1 contract, but the original sell order remains open. What happens if the sell order is fully executed?

In one-way position mode, if the platform allows regular sell orders to open positions in the opposite direction, this order might first close the remaining 1 long position and then open 1 short position. When Reduce-Only is enabled, this order can only reduce the remaining long position at that time and cannot continue to sell and open short once the position drops to zero.

1. What does a Reduce-Only order mean?

Reduce-Only is an execution restriction on orders. It dictates that an order can only reduce or close an existing position.

When holding a long position, use the sell direction to reduce the position. For example, holding 2 long positions, after 1 contract of the sell reduce-only order is executed, 1 long position remains.

When holding a short position, use the buy direction to reduce the position. For example, holding 2 short positions, after 1 contract of the buy reduce-only order is executed, 1 short position remains.

If the corresponding position has already dropped to zero, the reduce-only order has no position left to reduce. How the platform handles this order depends on its order rules.

2. When is Reduce-Only used?

1. Manually reducing positions after placing a limit close order

Returning to the example at the beginning. There were 2 long positions when placing the order, and only 1 remains after manual closing. If the original sell order is set to reduce-only, it can at most be used to close the remaining 1 long position. The platform may adjust or cancel the original order, and the specific handling method is subject to the platform's rules.

2. Placing close orders in batches

Suppose you hold 3 long positions and plan to place two sell orders of 2 contracts each. The two orders total 4 contracts, which already exceeds the current position. If the first order executes 2 contracts first, only 1 position remains. Before submitting the second order, you can check your current position, existing close orders, and the available close quantity displayed on the page.

3. What is the difference between Reduce-Only, Limit Orders, and Stop Orders?

Reduce-Only controls position changes. Once the order is executed, it can only reduce or close the corresponding position.

Limit orders control the execution price. The buy price cannot be higher than the specified price, and the sell price cannot be lower than the specified price.

Stop orders control trigger conditions. Once the set condition is reached, the system submits subsequent orders according to order rules. You can check the generated order status and actual executed quantity to confirm whether the position has been reduced.

For example, a reduce-only limit sell order has two restrictions simultaneously: it can only reduce long positions, and the execution price must not be lower than the specified sell price.

4. Frequently Asked Questions

Why would a reduce-only order be rejected or cancelled?

First check whether the corresponding position has been fully closed, whether the order direction is correct, and whether the order quantity exceeds the available close quantity. If multiple close orders are placed simultaneously, you can also check whether the platform includes existing open orders in the available close quantity.

Will a reduce-only order always execute?

Execution still depends on the order type, price conditions, and market depth. For example, if a reduce-only limit sell order is set at 105, but there are currently no counterparties willing to buy at 105 or a higher price, this order may remain open.

If a close order was only partially executed, how can I see how many positions are left?

Suppose you originally held 2 long positions, and the close order was only executed for 0.5 contracts with no other executions during that time, you currently have 1.5 long positions remaining. You can cross-reference the transaction history, current positions, and open orders to confirm the closed quantity, remaining position, and open order quantity respectively.

5. How does the 6MM Perpetual Contract API represent Reduce-Only?

In the 6MM developer documentation, reduce-only corresponds to the reduceOnly field. Teams integrating perpetual contracts can use this field to express the intention to reduce positions, and after submitting the order, confirm the execution result through the order status, transaction history, and current position.