The recent launch of trailing stop orders by OkCoin makes them the first Chinese Bitcoin exchange to offer this tool for traders on their trading platform. Although there hasn’t been a formal announcement by OkCoin about this feature, a look at their international website confirms this new development.
What is a trail order?
A stop order that can be set at a defined percentage away from a security’s current market price. If a trader takes a long position, a trailing stop would be set below the current average market price. On the other hand, if a trader takes a short position, a trailing stop would be set above the current price. By allowing the trader to set the defined percentage, trailing stop enable the trade to remain open and profitable for as long as the market is moving in the right direction. A trailing stop can also be set in quote currency which would be CNY on OkCoin trading platform.
The Big Deal
Traders are always looking for new ways to make profit. They are also looking for traditional tools available in other major financial markets in order to remain liquid. An exchange which claims to be the largest digital currencies exchange in the biggest Bitcoin market must bridge the gap between Bitcoin and institutional trading. Trailing stop orders are a common standard in the stock market because of the flexibility they offer to the trader. Rather than manually resetting in a fixed stop loss, a trailing stop order automatically tracks the movement in price before closing a position. This is yet another step towards attracting institutional money into the Bitcoin ecosystem.
Criticism
During the year 2013, 80% of Bitcoin trading volume took place on Mt. Gox. Ever since the downfall of Mt. Gox in Feb 2014, several Chinese exchanges sprouted to take over the lead in market share. Thanks to the Chinese, Bitcoin is now slowly ushering into the era of high frequency trading. Despite the heavy criticism around this practice, majority of Chinese exchanges are aware about and actively participating in it. Their zero fee trading model have caught the attention of market makers from around the world. But, this is not viewed in positive light by the Bitcoin community. In a AMA by OkCoin on Reddit, they admitted to be involved in HFT:
“It all boils down to the zero-fee trading model. Because we don’t charge our users any fees for trades there is a lot of HFT(High Frequency Trading) taking place. This leads to the “bloating” of our numbers.”
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