A little Learning my dear friends. Today let's look at an essential element in trading, the OCO order which is relatively little known.
So, an OCO order means in English “ One Cancels the Other » et so in French, we can translate it by the expression "One Cancels the Other). This type of order can be very useful because we can place two orders at the same time. Yes, this is possible because the OCO order actually combines a limit order with a stop-limit order. To keep this consistent and technically possible, tell yourself that only one of the two can be executed.
To understand better, tell yourself that as soon as an order is partially or entirely executed, then the second order is canceled immediately. And, remember that the cancellation of one of the orders simultaneously cancels the other so sine qua none.
Why do traders use the OCO order? They use it to maximize their profits because by placing two limit orders simultaneously, they also minimize potential losses.
Please note that the vast majority of exchange platforms like Binance, Kraken or even coinex have this option. Places can be placed for buy or sell orders.
As a reminder, here are the definitions of terms to know when you want to execute OCO orders:
Is it still not clear?
Let me use numbers to make it more understandable.
We will assume that you want to buy 3 ETH for 0,13 BTC because you believe the price is in a support zone and will increase. There, for example, you can use the OCO function to place a stop at 0,138 BTC and a limit order at 0,12 BTC for example.
If you were right and your estimate is correct and the price increases, then your sell order will be executed and the stop limit order will be canceled. Conversely, if the price has fallen rather, then your stop-limit order will be triggered. You will then minimize your losses, especially if the price drops even further.
Frankly, the OCO option is a really powerful trading option because it allows everyone to trade with more safeguards. We can more easily secure our profits, limit our risks and even get out of a delicate position better.
To fully understand OCO orders, you still need to be familiar with limit orders and stop-limit orders. This is what we recommend if you are not familiar with this method.
See also:
- The problem with Worldcoin wanting to scan your eyes for crypto
- The 4 trading mistakes that will make you fail
Note: All articles do not constitute financial advice or investment advice. Always do your own research before investing.
