What is an OCO order and how to use it in trading?

Note: Before studying OCO orders, it is recommended to familiarize yourself with the principles of limit orders and stop-limit orders.

Key Aspects of OCO Orders

• OCO order ( One Cancels the Other - "One cancels the other" ) allows placing two orders simultaneously, where the execution of one automatically cancels the other.
• OCO order combines a limit order and a stop-limit order into a single trading instruction.
• This type of orders increases trading efficiency by allowing the automation of profit-taking, risk limitation, and entry/exit from positions.

Principle of OCO order

An OCO order is a combined trading instruction that allows you to place two orders simultaneously - typically a limit order and a stop-limit order. The key feature of an OCO order is that only one of the two orders can be executed.

When a part or the entire order is executed, the second one is automatically canceled. It is important to note that manually canceling any of the orders will also result in the cancellation of the second.

On modern cryptocurrency exchanges, OCO orders serve as a tool for automated trading. This functionality allows placing two different orders simultaneously, which is especially useful for locking in profits and minimizing potential losses.

Step-by-step setup of OCO order

1. Log in to your trading account on the platform.
2. Go to the trading zone of the selected pair.
3. Click on "Stop Limit" to open the dropdown menu.
4. Select the "OCO" option.
5. After selecting OCO, a special trading interface will open, allowing you to set both orders simultaneously.
6. After placing the OCO order, you will be able to view the details of both orders in the "Open Orders" section.

Components of the OCO order

Limit order: Allows you to buy or sell an asset at a specified price. This order is visible in the order book and will be executed only at the price you specified or better.

Stop-limit order: Includes two key parameters:

• Stop Price: the level at which your stop-limit order ( is activated, for example: 553.34 USDT). In the OCO order interface, it is indicated as "trigger SL".
• Limit Price: the actual price of the limit order after the stop order triggers (, for example: 553.24 USDT ). In the interface, it is referred to as "limit SL".

Additional parameters:

• Amount: the quantity of the asset in your order (, for example: 5 BNB ).
• Total: the total cost of the order in the base currency.

Strategies for Setting Up OCO Orders

For sell orders

When holding a long position, it is advisable to set the stop price slightly below the key support level to minimize potential losses. This approach ensures that the stop-loss is triggered when the price falls. Support levels are formed based on prior price activity in areas where assets traditionally attract buying interest.

To increase the likelihood of execution, it is recommended to set the limit price ( limit SL ) slightly below the stop price. For example, a stop at 553.34 and a limit SL at 553.24. If the limit SL is set above or equal to the stop price, the risk of order non-execution increases during a rapid price drop.

For buy orders

When holding a short position and using a buy order as a stop-loss, it is recommended to set the stop price slightly above the key resistance level. This setting minimizes potential losses when the price breaks through the resistance level.

Unlike support levels, resistance levels are price zones where an asset typically faces selling pressure. For short positions, these levels also serve as protective barriers and are determined based on previous price movements.

To increase the likelihood of execution, it is recommended to set the limit price ( limit SL) slightly above the stop price. If the limit SL is set below or equal to the stop price, the risk of order non-execution increases during a rapid price rise.

Practical Application of OCO Order

Let's consider the trading range of the BNB/USDT pair. The upper white line marks the resistance level around $590, while the lower white line marks the support level around $560.

Suppose you plan to open a long position in this price range. The current price is $577.46, but you prefer to wait for a more advantageous entry closer to the support level (lower white line). Your target entry price is $562.91.

If the price does not drop to the target level, the trade will not take place. However, if the price reaches your entry price, you will open a position with a target profit-taking price of 589.52$ and a stop-loss at 553.34$.

If the price moves according to the blue scenario, the trade will close at a loss due to the activation of the stop-loss (553.34$). To make a profit, the price must move according to the yellow scenario ( entry at 562.91$ and profit taking at 589.52$).

In this example, the OCO order covers all possible outcomes, ensuring profit locking in the event of favorable price movement and limiting losses otherwise.

Technically, the stop price is set at 553.34 USDT (trigger price), and the SL limit is 553.24 USDT (order placement price). This means that the stop-limit order is activated when the price reaches or falls below 553.34, after which a limit sell order will be placed at the price of 553.24 USDT. It should be noted that if the price falls too rapidly below 553.24, there is a risk of the limit order not being executed.

Benefits of OCO Orders in Trading

The OCO order is a powerful trading tool that allows traders to trade more safely and flexibly. This type of order is especially useful for:

1. Automatic profit taking when the target price is reached
2. Limiting potential losses with a stop-loss
3. Effective entry into the market and exit from positions
4. Implementing complex trading strategies

To effectively use OCO orders, a deep understanding of the principles of limit and stop-limit orders is necessary. This basic knowledge forms the foundation for successfully applying more complex trading instructions and enhancing the efficiency of your trading operations.