How can I use OCO (one cancels the other) orders? – SaxoConnect

An OCO (one cancels the other) order is a type of advanced order that allows you to place two orders simultaneously. It is designed to automatically cancel one order when the other is executed, thereby helping you to manage risk and optimise your strategy.

OCO orders can be used to place stop orders and take-profit orders on open positions, as well as to enter the market.

Characteristics of OCO orders

Dual order placement: An OCO order allows you to place both a stop order and a limit order at the same time. This means you can set a predefined exit or entry point for both potential gains and losses without having to constantly monitor the market.
Automatic cancellation: When one of the orders is executed, the other order is automatically cancelled. This ensures that you are not left with an unintended position if the market moves in an unexpected direction.
Flexibility: OCO orders can be set at any price level, allowing you to tailor your trading strategy according to your market outlook and risk tolerance.

How OCO orders work

Entering the market

For long (buy) positions: An OCO order might include a limit order to sell at a higher price and a stop order to sell at a lower price. If the price rises to the limit order, the stop order is cancelled. Conversely, if the price falls to the stop order, the limit order is cancelled.
For short (sell) positions: An OCO order might include a limit order to buy back at a lower price and a stop order to buy back at a higher price. If the price falls to the limit order, the stop order is cancelled. If the price rises to the stop order, the limit order is cancelled.

Exiting the market

For long (buy) positions: An OCO order might include a limit order to buy at a lower price and a stop order to buy at a higher price. If the price falls to the limit order, the stop order is cancelled. Conversely, if the price rises to the stop order, the limit order is cancelled.
For short (sell) positions: An OCO order might include a limit order to sell at a higher price and a stop order to sell at a lower price. If the price rises to the limit order, the stop order is cancelled. If the price falls to the stop order, the limit order is cancelled.

Example of an OCO order

Suppose you own 100 shares of a company currently trading at USD 100 per share. You want to sell if the price reaches USD 110 to lock in profits, or if it falls to USD 90 to limit losses.

You set an OCO order with a limit order to sell at USD 110 and a stop order to sell at USD 90. If the stock price rises to USD 110, your limit order is executed and the stop order is cancelled. If the stock price falls to USD 90, your stop order is executed and the limit order is cancelled.

Advantages and disadvantages

Advantages

Risk management: OCO orders can help you manage risk by automatically executing one order and cancelling the other, based on market movements.
Strategic flexibility: They allow you to set predefined levels for both gains and losses, aligning with your trading strategy.
No need for constant monitoring: Once set, OCO orders manage trades automatically, freeing you from continuous market observation.

Disadvantages

Price gaps: In volatile markets, the execution price may differ from the set price, leading to unexpected outcomes.
Complexity: Setting up OCO orders requires a clear understanding of market conditions and trading strategies, which may be challenging for beginners.

How can I place an OCO order?

OCO order can be placed from the Trade Ticket > Open the Type module > Click Use Advanced Orders (if not previously clicked) > Click OCO

Now choose whether you want to buy or sell, number of shares/quantity, order duration, and your limit and stop price > Click Place order to finalise your trade