One-Cancels-the-Other Order - (OCO) Explained
A one-cancels-the-other order (OCO) is a pair of orders stipulating that if one order executes, then the other order is automatically cancelled. An OCO order combines a stop order with a limit order on an automated trading platform. When either the stop or limit price is reached and the order executed, the other order automatically gets cancelled. Experienced traders use OCO orders to mitigate risk and to enter the market. Basics of a One-Cancels-the-Other Order - (OCO) Traders can use OCO orders to trade retracements and breakouts. If a trader wanted to trade a break above resistance or below support, they could place an OCO order that uses a buy stop and sell stop to enter the market. For example, if a stock is trading in a range between $20 and $22, a trader could place an OCO order with a buy stop just above $22 and a sell stop just below $20. Once the price breaks above resistance or below support, a trade is executed and t...