Sometimes there are price gaps in crypto; FTX.com uses stop limits to prevent crazy prints. Let's say a user was short 1 BTC, and had a 1 BTC buy stop loss at 9600. BTC then jumps straight from 9590 to 9900. Should the stop loss:
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Makes sense now. And since it's a limit order, by default it will be attempting to limit buy at 9600 ad naseum, however since BTC is a 24 hour market... price should not be able to jump so long as there is a limit order on the books? Unless trading was paused for some reason.
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I suppose in this case we're assuming the market is significantly less liquid for some reason. Obviously FTX is not doing the volume of Bitmex (at least not yet), so while the market may be liquid, price could print such a wick before being arb-d back down
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*on a low-volume exchange, which likely wouldn't show up on others
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Yeah it's hard to happen on BTC but could def happen on a less liquid product (e.g. BNB futures after large Binance news comes out)
Great point. Especially on less liquid, more news-driven alts, I could see this becoming an issue.
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