You can use a lot of automated orders during your trading activity which can help you succeed. We have already learnt about Take-Profit Order and Stop-Loss Order. Let’s now find out about One Cancels the Other or OCO order.
An OCO order is a combination of the stop order and limit order for a future transaction.
The trading platform follows the market for the trader and will execute stop and limit orders (but not both). When? When the market arrives at a limit order or stop order, the one order will be executed, and the other order will be immediately cancelled.
The two orders are valid until they are cancelled in one of the following scenarios:
OCO order Scenario 1: Good ’til Canceled/ GTC
The trade order is valid until the trader cancels it. Traders execute the cancellation through an order on an internet trading program or through a telephone conversation with the broker. Some brokers set limits on how long they will hold a GTC order.
OCO order Scenario 2: Good Till Date/ GTD
The trade order is valid until the date that the trader sets. In other words: if by a certain date a trade order has not been executed, the broker or the trading program automatically cancels it.
If traders use OCO orders to enter the market, then they need to manually place a stop loss order once the platform executes the trade.
MetaTrader trading platform does not include OCO orders as a default feature. A trader that decides to use them has to download an Expert Advisor (EA) in order to add this option to the platform.
An EA is an automated process – software that allows you to place trades according to specific rules. EAs allow traders to “program” their trading environment easily and according to their needs.
Sources: LQDFX, Investopedia
PLEASE NOTE The information above is not investment advice.