OCO Order

OCO order (One Cancels the Others) is an order which contains two or more linked entry orders. When the market reaches the price of one of the orders, this order is executed while the other orders are automatically cancelled.

Using OCO Orders

Using OCO on Volatile Market

OCO orders can be useful if you expect significant price movements, but are not sure about their direction, for example on news announcements or on a flat market in anticipation of breakout in a channel.

Suppose you want to make a trade when the market price breaks out a certain level but you are not sure about the direction of this breakout. You can place two orders, buy and sell, and link them into OCO. The order whose price will be reached by the market earlier will be executed, while the other order will be automatically cancelled.

Let the price of EUR/USD be 1.4845. You want to either buy at 1.4890 over the resistance level or sell if the price falls below 1.4760. Just create an OCO order involving buy and sell entry orders. Once the market reaches the price of one order, the other order will be cancelled.

Using OCO with More than One Symbol

OCO orders can be useful if the account balance is insufficient to enter with several positions. In this case you can create a number of entry orders for different symbols and link them into OCO. When the market price of one of the symbols reaches the desired level, you enter the market in this symbol, while all the other orders get cancelled.

For example, you expect that US dollar will continue to fall. You want to either go long in EUR/USD or go short in USD/CHF. Create an OCO order involving a buy entry order for EUR/USD and a sell entry order for USD/CHF. You will enter the market in the symbol whose price will be reached by the market first.

Using OCO in Place of Stop/Limit Orders

OCO orders can be used in place of Stop and Limit orders for United States based accounts since Stop and Limit orders on individual trades for these accounts are not functional as they are not compliant with the National Futures Association (NFA) Compliance Rule 2-43 (b). That is why some traders use OCO orders as an alternative for Stop and Limit orders. However, OCO orders have a serious disadvantage. They can open new positions in case the amount of OCO exceeds the amount of currently open positions in the same instrument. A more convenient alternative for Stop and Limit orders for United States based accounts is ELS (Entry Limit Stop) orders.