What is an OCO order?

There are loads of different types of orders you can use on a spread-bet platform … market orders, limit orders, stop orders … but OCO orders are a bit special, and not every platform offers them.

But if you have a strategy that uses them, they provide a neat way to play market movements, and save yourself a lot of time and screen watching!

OCO stands for ‘one cancels other’.

In fact, an OCO is two orders (a stop order and a limit order), which are linked together by an OCO.

The OCO tells your broker that if one order is executed, then the other order is automatically canceled. When either the stop or limit level is reached and the order executed, the other order will be automatically canceled. Seasoned traders use OCO orders to mitigate risk.

One way traders use these is to catch sudden price movements – say after a news announcement. If you don’t know whether the price will shoot of upwards or downwards, but you’re confident it’s going to make a big move, you could set up an OCO order. The two orders it links would be a BUY order, set if the price rises by (say) 20 points, and a SELL order if the price falls by (say) 20 points.

That way, if the price shoots up, your BUY trade is triggers (and the other order is automatically cancelled). Or if the price drops, the SELL trade is triggered, and the other order is cancelled.

Related posts:

What is a market order? The alarming truth about your stop order