OCO Order - Trade with two Orders Simultaneously and Manage Your Risks

by Antonio Boston marketing manager

Today, many traders are attracted towards crypto investments due to high potential returns. In order to invest in the crypto trading market, it’s important for a trader to have enough knowledge about the market and trading strategies. And, this is the reason why crypto exchange like Binance offers a lot of interesting features and order types. These features help traders to generate profits in long term. One such order type attracting the traders is OCO Order.


Now the question is, what is an OCO Order?


OCO stands for One-Cancels-the-Other order which allows traders to place two orders at the same time and cancel one order automatically whenever the other order is executed. This is an effective tool to secure gains in the market.  


OCO order is a combination of two orders which can be used simultaneously on Binance including a limit order and a stop-limit order. But whenever you place an OCO order, the execution of only one order is possible. This means you can manage your risk by placing a take profit order and then stop-loss order at the same time. By using OCO orders Binance, you automate most of the trading automatically and reduce the need to actively monitor the trade.

The most common orders which can be used as OCO orders are:


  • Stop-limit order- An order that helps you to manage risks. This order closes your position, locks in losses, and then prevents losses.
  • Take-profit- This order locks in profits



Let’s understand this order with an example:


Suppose the current market price of any crypto asset say Stock X is $100. Now, you can place an OCO order with Taking Profit at $120 and Stop Loss at $80. 

If the market goes perfectly well and hits the $120 mark then, the Take Profit option will be executed. But at the same time, the Stop Loss order will be cancelled automatically. 

And, imagine if the market doesn’t go well, and the price hits $80, then a stop loss order will be executed and at the same time take profit order will be cancelled out.


Placing an OCO order

The very first step to place an OCO order is placing a primary order i.e. Take Profit order. As an investor, it’s time to head to the crypto trading platform and input all the required details. Once you are done, it’s time to select an OCO order from the available order types under the option advanced order or conditional order.


After placing a primary order, it’s time to enter secondary order. For this order, you can add conditions like Trailing take Profit, trailing limit sell, trailing stop, etc. 

Once you are done, there will be a preview available. Click on confirm and let the system works for you.


There are two main purposes for placing an OCO order:

  1. Managing risks in open positions
  2. Entering either a long or short trade following a breakout


How OCO order works in crypto exchanges like Binance?

As mentioned above, OCO orders help traders to reduce their risks. Usually, a trader sets an OCO order when the market is highly volatile. Otherwise, the trader has to wait for a long before any of the orders work.


However, high volatility is also a drawback for this order type. But, how? Let’s understand it with an example:


Imagine that the crypto trading market is highly volatile. The trader has placed a buy stop order, and expecting that the market will rise soon. And on the other side, he places a sell stop order, considering the changes in the downtrend, or the buy limit order considering a rebound strategy.


However, after the buy stop order was triggered, the deterioration in the market occurred. Here in this scenario, the pending orders will allow the trader to open positions without even monitoring the market.


All this means that the trader could miss that moment whenever the market moves in an opposite direction. As there is no stop-loss, there are chances that you may lose your investments.


High volatility is the reason for this situation, and therefore, it’s better to use the OCO order smartly. For this, you must be pretty sure that the market will form a trend soon and it won’t turn around until it reaches a specific point.


OCO orders are beneficial to those traders who want to limit their risks or those who trade with time constraints. With an OCO order, the orders for your take profit and stop loss levels are taken simultaneously, such that you have predefined the levels of rewards and risks.


If one of these levels hits in the trade, the other one will be canceled automatically. For example, with a long position, a stop-loss order will be placed below the market to limit the losses, and a limit order would be placed just above the market to close the trade to take profit.


When are the OCO orders beneficial?

OCO orders on Binance or any other exchange are beneficial for the traders if they don’t have time to watch the charts constantly, and are unable to react to the market as the price action unfolds.


In such conditions, you could use an OCO order so that your reaction to a certain price is pre-determined. Placing this order type will allow traders to take advantages of such opportunities automatically. One of the best ways to use OCO orders is to use resistance and support levels.


If there is a strong downward trend in the market, and you think that the price will move down, you could request a buy order well just below the support level. And, also you can place a buy order above the support level with an OCO order when there is a short position.

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About Antonio Boston Freshman   marketing manager

1 connections, 0 recommendations, 35 honor points.
Joined APSense since, August 2nd, 2021, From NEW YORK CITY, United States.

Created on Nov 13th 2023 08:03. Viewed 96 times.


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