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Wicks: what they are and how to handle them

This page answers: where wicks come from; why futures liquidation follows mark price rather than last price; which trigger price to use for a stop; and how leverage and position size reduce the damage.

You can't predict wicks or avoid them completely. You can use low leverage and small positions, give stops room, and know which price your stop is watching.

What a wick is

A wick is a sharp move away from the current price that reverses almost immediately. On a candlestick chart it leaves a long upper or lower shadow, like a needle, which is why Chinese traders call it a "needle".

The move may last seconds or minutes. In that time stops trigger and high-leverage positions can be liquidated. When the price comes back, the position is already gone.

Why wicks happen

Three causes, often together:

  • Thin liquidity. When each level of the order book holds little size, a modest market order can eat through several levels and push the price far. Small coins, quiet hours and the first seconds of a big move often have thinner books.
  • Large orders. Someone sends a market order bigger than the book can absorb, and the fill slides down the book.
  • Liquidation cascades. A move triggers a batch of liquidations and stops. Those closing orders are market orders in the same direction, which push the price further and trigger the next batch. Many of the largest wicks come from this chain reaction.

A wick can also appear on just one exchange. If the same coin barely moved elsewhere, that venue's order book probably had a gap at that moment.

Last price and mark price

USDT-margined futures have several prices at once:

  • Last price: the most recent actual trade. Charts show this by default. During a wick it jumps with those few unusual trades.
  • Index price: built from prices on several spot markets.
  • Mark price: the exchange's estimate of fair value for valuing positions. The formula differs by exchange; broadly it starts from the index and blends in basis, funding and last price, using a median or moving average. Its purpose is to stop a few odd trades from deciding your position's fate.

Binance, OKX and Bitget all state that liquidation follows mark price, and unrealized PnL uses it too. Bitget adds that in sharp swings its mark price may deliberately lag the market so short spikes don't liquidate positions. So during a wick, last price can cross your liquidation price without liquidating you, and the reverse can also happen. To check, switch the chart to mark price.

Why not liquidate on last price? One large order in a thin book can push last price a long way. If liquidation used it, anyone could print a wick cheaply and wipe out a crowd of positions. Mark price means liquidation doesn't hinge on one or two odd trades.

Which trigger price for your stop

All three exchanges let you choose the trigger type for futures TP/SL. The names and defaults differ:

  • Binance: the interface offers "Last Price" and "Mark Price". The API parameter workingType defaults to CONTRACT_PRICE, which is last price (see the Binance New Algo Order doc below).
  • OKX: you can choose last, mark or index price, and TP/SL watches only the one you chose (see the OKX pages below). We could not find OKX's own statement of the default, so check OKX's current docs.
  • Bitget: the API doc says the trigger type defaults to market price, with mark price as the other option (see the Bitget Place Order doc below). For the default in the web and app interface, check Bitget's current docs.

Each trigger type has its own consequences:

Last-price triggerMark-price trigger
During a wickEasily hit. One touch triggers it, then the price returns without you.A brief spike may not move mark price that far. Harder to hit.
Fill after triggerThe market really traded near that level, so the fill is usually closer.Mark price is calculated and can't be traded at. The fill can land further away.
Relation to liquidationLiquidation uses mark price, so the two may not line up.Same price as liquidation, so it's easier to judge whether the stop fires first.
Stop-limitMay not fill.Binance notes a mark-price stop-limit is more likely to sit unfilled after triggering.

Neither is simply right. The difference is which consequence you accept: with last price, a brief spike triggers the stop more easily; with mark price, the trigger is slower, but the fill can land further from the trigger.

One point applies either way: Binance notes that if a stop sits too close to the liquidation price, liquidation may come first and the stop then lapses.

Why the stop must live on the exchange, and how stops slip, is in Why stop-losses should sit on the exchange.

Use leverage and size to limit the damage

The trigger type is a detail. Leverage and size decide how much a wick costs.

  1. Decide the maximum loss first, then size. Work back from stop distance and the amount you accept losing.
  2. Put the stop outside normal noise. A stop inside the usual range is waiting to be hit. A wider stop means a smaller position.
  3. Leverage sets how close liquidation is. High leverage pulls the liquidation price close, so a modest wick can reach it before the stop does anything. Low leverage keeps liquidation far away.
  4. Allow for slippage. In a wick the stop may fill well past the trigger. Include that in your maximum loss.
  5. Thin coins wick more. Thin books wick more often and further, and stops slip more.
  6. Don't stack the same bet. Many same-direction positions can all trigger on one wick. Cap total exposure.

TonyTrade enforces these with fixed rules: per-trade size, total exposure, maximum leverage, maximum daily loss, coin whitelist and daily order count. Plans from the AI that exceed them need your own confirmation. Every position opens with its stop on the exchange, or doesn't open. See Features, How it works and Safety design.

After a wick

  • Check the real state on the exchange: positions, open orders, fills. TonyTrade also reconciles with the exchange each time it opens.
  • See how the stop fired: which price type, where it filled, whether in pieces.
  • Don't rush to win it back. Markets often stay unsettled after a wick, and a bigger position just takes the same risk again.
  • Use stop-all if needed, and decide the next step once things are quiet.
There is no complete defence against wicks. Whatever the settings, extreme moves can cause large losses, including all of your margin. Full risk notes are on Risk.

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Sources

Official exchange pages cited here. Mark price formulas and update rates change; follow the exchange's current docs. Compiled by the TonyTrade team.