One Cancels the Other Order (OCO) Definition
A One Cancels the Other Order (OCO) is a pair of orders combining a stop order with a limit order. When either of these orders is fully executed or part-executed, the other is automatically cancelled. In the context of cryptocurrency trading, an OCO order secures the trader from excessive loss and also supports the profit target.
One Cancels the Other Order (OCO) Key Points
- Inclusive of a stop and a limit order, and their simultaneous cancellation if either is executed.
- Protects the crypto trader from extreme loss and helps achieve profit goals.
- Valid until either the limit or stop order is fully executed or cancelled.
- Used primarily when the direction of the market is undetermined by the trader.
What is One Cancels the Other Order (OCO)?
The OCO, or One Cancels the Other Order, is a strategic tool embraced by many traders. It involves two orders; a stop and a limit order. When either of these two orders are executed, the other order is automatically cancelled. In essence, it offers a level of financial security when trading in volatile markets like that of cryptocurrencies.
Why use One Cancels the Other Order (OCO)?
Traders use OCOs to safeguard their assets and manage their positions efficiently. In cryptocurrency trading, for instance, the OCO serves as a fail-safe mechanism. One order (the stop order) aims to prevent excessive loss, triggered once the market reaches a specified declining price point. The limit order, on the other hand, is meant to net profit. It is executed only when the market reaches a specific increasing price point.
Where can One Cancels the Other Order (OCO) be used?
OCOs can be utilized in any financial market, including that of cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. More specifically, they are used on cryptocurrency exchanges. There, OCO orders can be an efficient strategy irrespective of the market direction.
When can One Cancels the Other Order (OCO) be used?
An OCO can be used when the trader is unsure about which direction the market might head. The advantage of using this type of order is that it allows traders to play both sides of the market.
How to use One Cancels the Other Order (OCO)?
To make use of an OCO order in the crypto market, traders start by determining the stop and limit price. When one of these conditions is met, that order is executed, and the other order is immediately cancelled. Therefore, the OCO order indicates two possible outcomes, giving traders the opportunity to simultaneously set an unrealized profit point and a stop loss level.
