Considered the most basic form of trade automation, one cancels the other (OCO) is an order combining 2 entry orders. It is basically a conditional order stipulating that, if one order is executed, then the remaining one is automatically cancelled.
Ultimately, regardless of the price movement, only one order can be executed or remain active in the market at any given time.
Trade automation is vital for success in the markets. This is what an OCO achieves. It essentially eliminates emotions from trading activity and promotes systematic trading by ensuring triggered entering of trades.
A trader sets the parameters to be met before a trade is entered. If the conditions are met, the trade is entered; if not, the alternative trade, usually in the opposite direction, is triggered.
This effectively removes human subjectivity in trading and enhances objectivity. An OCO is also used as a risk management tool, ensuring that traders minimize negative exposure to the markets, while simultaneously enhancing their potential profitability.
The importance as a risk management tool is often something that is overlooked; however, it is a prerequisite to the success of your trading career. Planning ahead and knowing what risk management tools to implement is the essence of managing your trading portfolio.
Do not fall into the trap of entering your trades blindly or with a gambling attitude: you may enter one or two lucky strikes; however, emotions begin to dictate your trades and eventually this will cause you to endure painful losses.
There are endless benefits for investors when using the OCO orders as a risk management tool. For instance, when markets are experiencing price gaps as well as sharp price movements that occur in an unplanned trading environment, a trader may fail to open a position on one predefined level. Pre-setting the OCO order will be your solution to these occasions.
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How to use One Cancels the Other?
Setting One Cancels the Other Order
Locate the desired instrument, settle on buy or sell. Right-click the instrument and choose Entry OCO.
Set your preferences on the Entry OCO Order window.
Setting One Cancels the Other Order on an existing Entry Order
In order to set an OCO order, first open an entry order. This will appear in the order windows in your platform.
Once the first order appears, while hovering above the row with your order, right-click with the mouse and choose the OCO Link option. Then choose Set to New Order.
The new window that will appear, offering you to make the opposite entry order to the existing one (i.e., entry limit sell, will have an OCO order of entry stop sell)
Once the second entry order is set, the order window will show both orders, including the number of the other order.
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