Range Orders
Plenty V3 introduces a novel approach to swapping through automated market makers (AMMs) with the concept of Range Orders. This feature allows for customizable liquidity positions and single-sided asset provisioning, offering a mechanism similar to traditional limit orders.
In conventional order book markets, limit orders can be set to buy or sell an asset at a predetermined price, to be executed at an unspecified future time. In Plenty V3, you can approximate this by providing liquidity for a single asset within a specific price range. Once the spot price crosses this range, the target asset becomes available for withdrawal, effectively executing the range order.
Unlike traditional markets where limit orders might incur fees, range orders in Plenty V3 generate fees for the liquidity provider as the order gets filled. This is because range orders are technically a form of liquidity provisioning.
Types of Range Orders
The architecture of AMMs allows for certain types of limit orders to be replicated, while others cannot. Here are some examples:
Possible Range Orders
Take-Profit Orders: If the current USDt/CTEZ pool price is 1 USDt/CTEZ and you wish to sell your CTEZ when it reaches 1.5 USDt/CTEZ, you can set a range order by providing CTEZ at that price. The order will be filled when the spot price crosses your set range.
Buy Limit Orders: If the current USDt/CTEZ pool price is 1 USDt/CTEZ and you anticipate that CTEZ will rebound after dropping to 0.5 USDt/CTEZ, you can set a range order by providing USDt at that price. The order will be filled when the spot price drops below your set range.
Impossible Range Orders
Buy Stop Orders: You cannot set a range order to buy CTEZ at 1.5 USDt/CTEZ if the current price is 1 USDt/CTEZ, as the price space above the current spot price is denominated in CTEZ.
Stop-Loss Orders: You cannot set a range order to sell CTEZ at 0.5 USDt/CTEZ if the current price is 1 USDt/CTEZ, as the price space below the current spot price is denominated in USDt.
Fees and Strategies
Fees generated from your liquidity position will be denominated in both tokens of the given pair. For example, after swapping CTEZ for USDt or vice versa, a small amount of both CTEZ and USDt will be credited to your account as liquidity provisioning rewards.
The choice of concentration for setting range orders is up to the user. A wider range may generate more fees if there's price volatility within your range, but it also increases the risk of the order being unfilled if the spot price reverses before completing your full range.
Last updated