One Cancels The Other Order

An One Cancels The Other (OCO) order is a type of advanced trading order that allows traders to set two orders simultaneously, typically combining a stop order with a limit order at different price points. The defining feature of an OCO order is that once one of these orders is triggered and executed, the other order is automatically canceled. This strategy is particularly useful for managing risk and automating trading decisions, as it enables traders to set predefined exit points for both potential profits and losses. By doing so, traders can ensure that they either capture gains if the market moves in their favor or limit losses if the market moves against them.

For example, a trader who holds Bitcoin might place an OCO order with a stop-loss order set at $30,000 and a limit order set at $40,000. If Bitcoin's price falls to $30,000, the stop-loss order will execute, selling the Bitcoin to prevent further losses, and the limit order at $40,000 will be automatically canceled. Conversely, if the price rises to $40,000, the limit order will execute, locking in profits, and the stop-loss order will be canceled. This dual approach provides a balanced strategy that helps traders manage their positions without needing to constantly monitor the market.