Have you ever placed an OCO order while trading cryptocurrency? Now you will wonder what it is.

Well, you might have seen this term enlisted among the cryptocurrency terminology. OCO means ‘One cancels the other order or ‘Order Cancels Order’. These orders help mitigate the risks by placing two orders simultaneously.

What is an OCO order?

OCO order is an order combining two entry orders. If one of the two orders is executed, then the second one/other order is canceled automatically, ensuring that regardless of the price movement in the market, only one order will be executed.

We all know, trade automation is vital for success in the crypto market and this is what an OCO order achieves. OCO order is also used as a risk management tool, ensuring that allows you to trade in a more secured way, either by limiting risks or locking potential profits. OCO order is a conditional order that combines a limit with a stop-limit order.

When it comes to trading on Binance exchanges, you can use OCO order as a basic form of trade automation. These orders are used to minimize the risk of trading in the highly volatile crypto trading market.

OCO Orders: Process

As mentioned above, these orders help traders to limit risks. Let’s imagine you have some 10 crypto coins at $100. As the market is highly volatile, you place an OCO order. Due to volatility, you anticipate the price can move down, but you don’t want to lose more than $15. Here you can place a stop sell order at $85 which means that if the price slips down to $85, your coins will be sold. However, if the price moves upward to $115, the sell limit order will be triggered.
Here at this point, if one order is executed, the second one will get canceled automatically. The OCO order is generally set when the market is highly volatile. Otherwise, the trader has to wait for a long time.

Let’s understand it with another example:

OCO orders are useful when trying to enter positions. Say, BNB is trading between $45 - $50, you may want to create an OCO order that either buys on a resistance breakout above $50 or buy if the price drops to $45 support level.

If one order gets executed, the other will get executed. So, depending on the situation, you may want to place a new order after the OCO order is executed.

The best OCO strategies

An OCO order is not only about limiting risks, but it’s a tool for trading strategies to earn profits. It can be used for both breakout and retracement strategies.

Breakout strategy

If you are unsure whether the market will increase or move down, you can go with a breakout strategy. This strategy is based on the break of either support or resistance levels. Thus, an OCO order consists of buy stop and sell stop orders which means that the order will be executed if the price breaks above the set price/level.

Retracement strategy

This strategy supposes that you either buy at support or sell at resistance. Thus, the OCO orders are represented by buy limit and sell limit orders. This further means that you expect that the coin price will reach to a defined level and then turn around.

How to place an OCO order?

In trading terms, OCO orders have provided a way for traders to sell at a higher price or to place a stop limit if it goes below the set price.

To place a Binance OCO order, log in to the Binance platform and click on the arrow beside the OCO and select OCO from the list. This will further add more fields where you can place order quantity and set price.

On Binance, OCO orders can be placed as a pair of buying or selling orders. After clicking on the OCO option, a new trading interface will be shown which allows you to set a limit and stop-limit order.

Example:

Suppose you bought 5 BNB at 0.0027537 BTC because you believe that the price is closer to the major support zone. In this case, you can use an OCO order to place a profit-taking order at 0.0030 BTC with a stop-limit order at 0.0025900 BTC.

If your prediction goes well and the price rises to or above 0.0030 BTC, your sell order will be executed, and the stop-limit order will be canceled.

On the other side, if your prediction goes wrong, and the price drops to 0.0025950 BTC, the stop-limit order will be executed.

This will minimize your losses, in case the price drops more. In the above example, the stop price is 0.0025950 which is the trigger price, and the limit price is 0.0025900 which is the trading price of your order.

This means that the stop-limit order would be triggered if it reaches at the mark of 0.0025950. but the actual price of the trading would be 0.0025900.

OCO trading is simple yet a powerful tool that allows users to trade in a more versatile and secure way. These orders are useful for limiting risks, locking profits, and are even good for entering and exiting positions.

OCO orders: Benefits and limitations

Although the OCO order seems simple, it can be tricky at the same time. And, that’s why only experienced traders use it to lower risks. Let’s have a look at its benefits and limitations;

Benefits

• Win-to-win strategy
As it’s always complicated to define the upcoming market trends, an OCO order allows the traders to place opposite orders. And, a trigger of any of them leads to a successful trade.
• Limits risks
The key function of OCO orders is to limit your market risks. Placing an OCO order reduces the risk of a wrong trade by 50%.
• Limit the time efforts
These orders consist of pending orders which means you don’t have to monitor the market all the time. You can place an OCO order and forget about it until it’s executed.

Limitations:

• Tricky and not for all
OCO order is tricky and doesn’t suit novice traders. To place these orders, you must have a complete understanding of how to place these orders and must have an idea about order types. If you are skilled enough, then you can try this tool.
• Not supported by all platforms
Some platforms do not support OCO orders as they may to higher margins or losses.

Summary

OCO orders are the unique orders which are best in reducing risks, sealing profit, and for entry and exit orders. Make sure to have a complete understanding of limit and stop-limit orders to understand the depth of using OCO orders. The best platforms like TrailingCrypto supports both basic and advanced order types including stop-loss orders, take profit, OCO orders, and more.