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A reduce-only order can only decrease or close an existing position. It cannot increase that position and it cannot flip you from long to short or from short to long. This is a safety setting that helps prevent accidental trades. In practice, it matters most when you manage exits from a live position, which is covered in How to manage TP/SL and Edit or cancel orders/positions.
Reduce-only is not a strategy. It is protection against unwanted position increases.

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Why it matters

Without reduce-only, an exit order can sometimes do more than you intended. For example, if you try to close a long with a sell order that is larger than your current position, you might accidentally open a short position. Reduce-only prevents that.

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Simple example

Imagine you already have a long position of 1 ETH. You place a reduce-only sell order for 1 ETH.
  • If it fills, your long is closed
  • If it fills partially, your long is reduced
  • If the long is already closed, the remaining order will not open a short

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When traders use it

Reduce-only is commonly used for:
  • take profit orders
  • stop loss orders
  • scaling out of a position
  • safer position management in volatile markets
If your goal is only to close or reduce a position, enabling reduce-only is usually the safest choice.