How to use Range Orders
Introduction
Orca’s CLMM allows users to create customizable liquidity positions, such as single-sided asset positions, enabling them to trade in a way that is more familiar to users of Central Limit Order Books (CLOBs). These advanced strategies, often referred to as range orders, were not possible with traditional CPMM models.
A CLOB trader typically deploys limit orders to trade assets only at a specific price. Such orders are filled (subject to available liquidity) when the market reaches the set price.
By providing single-sided liquidity, Orca’s CLMM can broadly mimic a CLOB limit order.
These range orders offer both advantages and disadvantages compared to traditional CLOB limit orders. However, when used effectively, they allow a user to automatically buy or sell an asset at a predefined price.
The key advantages of a CLMM over a CLOB in this context include:
Fee earning: While creating limit orders in a CLOB often incurs costs, CLMM users earn fees as their order is executed.
Tax advantages: In many tax jurisdictions, a taxable event is not triggered until assets are withdrawn from the CLMM. This allows users to delay taxable events while assessing current market conditions.
Limitations of range orders on a CLMM
The nature of CLMM mechanics means that not all order types that can be executed on a CLOB can be mimicked on a CLMM. As the current price of a pool rises, the asset increasing in value (relative to the paired asset) is incrementally sold for the asset decreasing in value. This mechanism means that only certain types of range orders are possible, specifically Buy Limit Orders and Take Profit Orders, which rely on this direction of conversion.
While a range order may appear no different from any other single-sided liquidity position, it is defined by the user’s intention rather than the mechanics of the pool. For a range order to be considered executed, the user must withdraw their assets. Otherwise, the range order will continue to function like any other position, with one asset being exchanged for the other as the price fluctuates within the position’s price range.
How to create a Buy Limit Order
Orca’s CLMM can be used by traders to execute a Buy Limit Order. This is made possible by CLMM mechanics—when one asset rises in value relative to its paired asset, it is sold in exchange for the other asset. By carefully deploying a single-sided liquidity position, traders can leverage the CLMM to effectively execute a Buy Limit Order. Examples: You believe that SOL is likely to fall to a price of 150 USDC from its current price of 160 USDC before rebounding, and you want to buy SOL at the lower price to take advantage of the anticipated recovery. This can be achieved by creating a single-sided position across a downside price range in a SOL/USDC pool. For this example, we will create a tight custom range of 150.002226–150.017226 USDC per SOL in the 0.01% fee tier SOL/USDC pool. The deposit will consist entirely of USDC. We now wait for the price to fall to or below the range minimum and then close our position. By that point, all the USDC will have been exchanged for SOL, and we will also have earned some trading fees. It is also possible to create a type of buy limit order that cannot be achieved on a CLOB, designed to take advantage of an anticipated protracted downtrend with an expected bottom. In this case, a wider range can be set, aiming to earn trade fees throughout the duration of the downtrend. For example, we could create a range from 150.002226 to 160.011694 USDC per SOL. As the price moves down through this range, small amounts of USDC will be traded for SOL at every price point between the maximum and minimum range until all the USDC is exhausted.
If we withdraw after the price reaches or falls below our minimum range, the position will consist entirely of SOL, and we will have earned additional fees. With this method, the price paid for SOL will be averaged across the selected range, meaning it will be higher than the chosen minimum.
Position Creation Process
Navigate to the Liquidity page (https://www.orca.so/pools)
Connect your wallet.
Locate the pool in which you wish to create your Buy Limit Order by finding it in the pool list or using the search field
TIP: You can search using the token name, ticker, or token mint address, but check carefully that you have selected the right token.
Click on the pool you wish to add liquidity to. The liquidity sidebar will open.
After selecting Custom Range a one sided range can be created in three ways
By dragging the sliders
By free typing the prices in the lower and upper fields
By using the + and - buttons in the lower and upper fields
(Optional) Adjust your liquidity slippage by clicking on the liquidity button - see Understanding Slippage for more details. Once you are satisfied with your deposit values, click Deposit.
Review the details in your wallet, including payable network fees and approve.
REVIEW CAREFULLY it is critical you check your range and the current price of the pool match your intentions, depositing liquidity to a pool with a price not consummate with wider market values may result in loss.
If the price dips and passes through your range, your position will be made entirely of SOL tokens. You must withdraw your liquidity at this point to ensure it does not become active again and your position revert to USDC.
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