An OCO Order (Order Cancels Order) is a pair of orders stipulating that if one order executes, then the other order is automatically canceled. An OCO order combines Take Profit with a Stop Loss order. If any of the order executed another order automatically gets canceled.
According to Investopedia:
Traders can use OCO orders to trade retracements and breakouts. If a trader wanted to trade a break above resistance or below support, they could place an OCO order that uses a buy stop and sell stop to enter the market. For example, if a stock is trading in a range between $20 and $22, a trader could place an OCO order with a buy stop just above $22 and a sell stop just below $20. Once the price breaks above resistance or below support, a trade is executed and the corresponding stop order is canceled. Conversely, if a trader wanted to use a retracement strategy that buys at support and sells at resistance, they could place an OCO order with a buy limit order at $20 and a sell limit order at $22.
For example, let say that an OCO order consists of two orders; 1) a limit order to buy 500 shares of one symbol and 2) a stop order to sell 200 shares of another symbol. If the limit price of #1 is hit and fills, the stop order #2 is automatically canceled.
We all know that crypto trading has become the hottest trading market these days than gold, oil, or even stock market trading. There is no doubt that this is an exciting market for traders across the globe, but unfortunately, success doesn’t happen as easily as it seems.
Prices for Bitcoin and other cryptocurrencies are moving up and down with each passing hour. And, to be successful in crypto trading, you need an effective strategy and plan to take advantage.
Apart from having the right strategy, you also need the best crypto exchange platform to ensure that you can buy and sell crypto assets easily. There are tons of cryptocurrencies, advanced tools, and effective trading strategies that promise to make you rich. We all know that volatility has become synonymous with the cryptocurrency market. The violent uptrend and downtrend swings in the market can move the crypto pairs quickly which further leaves beginners wondering how the experts are turning these panic movements into opportunities.
So, the next question is, how can you know what should be your next move to maximize your chances of reaching at top?
And, setting the limit orders or other advanced order types is the solution for the traders to earn profits on crypto trading. These orders will let you earn profits in time and won’t let you lose your money. While placing such order types, you need to just select the price where you want to buy or sell cryptos, and when your set price reaches that point, it will execute your order.
Anyone can place traders but managing them is more difficult. And that’s the reason advanced order exists. You may go with advanced order types like OCO (Order Cancels Order) orders to ride the double-digit gains in the crypto market. These effective tools will help you to secure your profits and losses.
TrailingCrypto is one such trading platform that provides unified exchanges and effective trading tools, and advanced strategies to help traders maximize their profits. OCO is one such tool or order combining 2 entry orders. These orders let investors buy an asset and simultaneously create two sell orders. If one of the orders is triggered, the second one will be canceled automatically.
For placing gain and loss orders that cancel each other automatically, the use of OCO strategies is required.
Let’s understand OCO orders in deep:
OCO order (Order Cancels the Other Order) or (Order Cancels Order) is a type of conditional order, which is often placed with a pair of gain and loss exit orders. If one of the orders is fully or partially fulfilled, the other one gets canceled automatically. An OCO order often combines a stop order with a limit order on an automated trading platform like TrailingCrypto.
Experienced traders generally use OCO orders to mitigate risks and to enter the market. This is a conditional order for a pair of orders in which the execution of one order cancels the other.
While opening a long position on Bitcoin, two sell orders will be placed, determining the operation’s gain and loss exits.
So, if the entry Buy Order is executed, two sell orders (one gain and one loss) above and below the initial entry price will be placed respectively as per the set parameters.
These orders will not be the market orders. The gain order here will be the limit order which goes directly to the exchange where it’s held.
And the loss order will be the stop order. It’s stored locally on the platform and will be executed only if the set price is reached.
Ultimately, regardless of the price movement, only one order is executed and remains active. Trade automation is vital for success in the volatile crypto market. And, this is what an OCO order achieves.
An OCO order is also used as a risk management tool which is often something that is overlooked. Planning ahead and knowing what risk management tools to implement is the core of managing your trading portfolio. When using OCO orders as a risk management tool, there are endless opportunities available for investors.
An OCO Order (Order Cancels Order) is a pair of orders stipulating that if one order executes, then the other order is automatically canceled. An OCO order combines Take Profit with a Stop Loss order. If any of the orders are executed another order automatically gets canceled.
For instance, if the market is experiencing price gaps as well as sharp price movements that occur in the unplanned trading environment, the trader may fail to open a position at a predefined level. And, setting an OCO order will be the solution to all such risks.
Traders will use an OCO order to enter either long or short. So, when the market makes its move, the trader can be confident to be in, one way or the other. There are two main purposes of using OCO orders:
- Managing risk in an open position
- Entering either a long or short trade following a breakout
Basics of OCO order
Traders can place OCO orders to trade breakouts and retracement. If they want to trade a break above resistance or below support, they can place an OCO order which uses a stop sell or buy stop order.
For instance, if a crypto coin is trading in a range between $100 and $120, a trader could place an OCO order with a buy stop just above $120, and a stop sell just below $100. Once the price breaks above or below the set limit, a trade will be executed and the second one will be canceled.
Conversely, if a trader wants to apply a retracement strategy, they could place an OCO order with a buy limit order at $100, and sell limit order at $120.
Suppose a trader owns 1000 BTC coins trading at $100. The investor expects BTC to trade in a wide range in the near term and set a target at $130. For risk mitigation, they do not want to lose more than $20 per coin. Here, the trader could place an OCO order, which could consist of a stop-loss order to sell 1000 BTC coins at $80, and simultaneously, a limit order to sell 1000 BTC coins at $130. Whichever occurs first, the second one will be cancelled automatically.
And, if the trader places these orders independently, there is a risk that they might forget to cancel the stop-loss order, which could result in an unwanted short position of 1000 coins if the BTC subsequently trades down to $80.
How to place OCO orders at TrailingCrypto:
- Select OCOorder type.
- Select Base and Quote coin.
- g. Market: BTC/LTC
- Select the number of coins that need to be sold.
- g. 10 coins. (quantity could be in the fraction)
- Fill the Stop Loss fields. Refer Stop Loss.
- Fill the Take Profit fields. Refer Take Profit.
A hypothetical example:
Suppose the current market price of BTC is $100. Now someone placed an OCO order with Taking Profit at $110 and Stop Loss at $90. If the market hits $110 then, the Take Profit option will be executed and at the same time, the Stop Loss order will be canceled.
Imagine if the market doesn’t go well, and the price hits $90. This time stop loss order will be executed and at the same time take profit order will be canceled out.
Price restrictions for OCO orders
For the sell orders, the prices have to follow the following rule:
- Limit price of the limit maker order>market price>stop price for the stop-limit order
For buy orders, the prices have to follow the rule as:
- Limit price of limit maker order<market price<stop price of the stop-limit order
If the last price for any asset is $100, then the sell OCO must have a limit price greater than 100, and the stop price must be lesser than 100. And, a buy OCO must have a limit price lesser than 100, and the stop price should be greater than 100.
In an OCO order, set of two instructions is given to fill out the orders:
- At the price you want or
- Once it reaches a certain target
Whenever the limit order is triggered, stop-limit order will be canceled automatically. If the stop price is reached, stop limit order will be executed, and the limit order will be placed.
In an OCO order, the user has to set 3 different prices:
- Limit price (take profit)
- Stop price
- Stop limit price (cut loss)
If you have 500 USDT in your trading account and you think that the overall trend of the BND or USDT market is going up and you want to enter the market at a reasonable price.
Say, the last traded price for BNB is 128.05 USDT, and the resistance is around 129.50 USDT. You want to buy BNB at 127.00 USDT, and at the same time, you also don’t want to miss out an opportunity when the price breaks the resistance price.
Here you can place an OCO order with a quantity of 10, which combines limit buy and a stop limit buy order. The price for the limit maker order is 127.00 USDT. For stop limit order, the stop price is 129.50 USDT, and the limit buy price is $30.00 USDT.
To place an OCO order,
Select OCO order in the drop-down box, then specify the limit price to be $27 USDT and the stop price $29.50 USDT, and stop limit price to be $30 USDT, with the quantity as 10. Then you may click Buy BNB to submit an order.
Once the orders are submitted, existed orders can be found and reviewed in Open orders section.
Benefits of using an OCO order
Using OCO orders is the right way to semi-automate your crypto trading. The key benefits of using an OCO order are:
- Risk-reward customization
These orders allow the traders to customize their risk to reward ratio which is actually the relationship ratio between your potential rewards and risks taken. With a pre-defined risk-reward ratio, you can determine the exit points for both pre-determined take profit and cut-loss points. These orders allow you to set your exit points during the trade execution.
- Protects profit
Holding a short position that is deep in the money? Utilize OCO orders to maximize your profit and set a minimum profit in case of a trend reversal. This ensures that your winning position will be protected. You can do so by setting the limit order as your profit target and using the stop limit order to protect your gains.
- Minimal monitoring
Regardless of which trading strategy you choose to deploy, you can semi-automate it by utilizing OCO orders anytime. Pre-determine your take profit and cut loss points without manual monitoring.
OCO orders are generally used by experienced traders who want to limit their market risk when entering a position. These orders are useful when trading breakouts or retracements because of their risk management feature. Traders may use these orders when anticipating a significant move in either direction, but they are unsure which direction it will be.
Placing an OCO order on Binance via TrailingCrypto
The traders can add OCO orders at Binance and via TrailingCrypto you can directly place an order on the Binance platform too. In trading terms, OCO orders are a way to sell at a higher price or to place a stop limit to sell it if the price goes below a certain price.
To place an OCO order on Binance, click on the arrow besides OCO and select OCO from the list. This will show more fields where you can set your price and quantity. Here you will see the fields shown below:
Sections for OCO order
It has two sections, i.e. limit and stop-limit. Think of limit as selling for profit and stop-limit as an order to minimize risks or losses.
If someone buys LTC for $70 and now it’s trading at a price of $67. He wants to sell it if it goes beyond $76.06, and makes a profit of $6.06. However, if it falls below $64.55, he wants to sell it off to limit the loss to $6.5.
Whenever he places these numbers into fields, the following orders will get created:
- Limit maker
- Stop-limit order
The first order is a limit order to sell at a higher price. Order will get executed if the price reaches $76.06. And, the second order is stop-limit. In this case, if the price goes below $64.55, and to sell at $64.55. If any of these two orders get executed, the other one gets canceled as there would be nothing to sell.
And, that’s the OCO order!
OCO feature is a simple yet powerful tool, which allows users to trade in a safe and versatile manner. This special type of order is useful in locking in the profits and limiting the risks for entering and exit positions.