What is One Cancels Other (OCO)
A one cancels other (OCO) is a pair of conditional orders stipulating that if one order gets filled, then the other order is automatically canceled.
OCO often 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 is executed, the other order or group of orders gets canceled automatically. Experienced traders use OCO orders to mitigate risk or to enter the market at a more favorable price.
How to create OCO
OCO connection may be created between spot Limit and Stop (Stop-Market) orders. Here’s how to set up your first OCO connection:
1. On the Trading page, head to the trading widget on the right-hand side and select a Stop or Limit order.
2. Specify your order details and enable the "One cancels other" option. Select the one you want to set up a connection with from the list of available open orders.
3. Double-check the order details and proceed with the [Buy …/Sell …] button. The order will be placed, creating the OCO connection with the selected order.
View and manage your open orders connected with OCO
Once you connect orders with the OCO option, they will be tagged as "OCO" in the "Open orders" tab. If you have Stop-Loss or Take Profit enabled on any of those orders, you will be able to modify them anytime without disrupting your OCO connection.
This connection is also visible on the chart when one of those orders is selected. You can move them freely and change their position on the chart, with no impact on your OCO connection.
Situations when OCO order can be used
The use of OCO orders is limitless, and you can create an infinite combination of orders connected with each other. At Bitsgap, we strongly recommend using OCO orders for the following strategies: Stop Loss and Take Profit, Buy More, and Exit or Averaging Down.
Stop Loss and Take Profit
The most common use of the OCO connection is to set up the Stop-Loss and Take Profit combination. To do so, we would need to combine 2 Sell orders of different types.
The Take Profit order should be Limit. It will place your coins in the order book to be filled by the market. This order will reserve your funds in trades.
The Stop-Loss order should be Stop (Stop-Market). The Stop-Market will guarantee exit at the best price available. This order will not reserve your funds in trades.
If the Take Profit order is filled, then the Stop Loss order gets canceled, and vice versa.
If you are interested in acquiring more base currency when the price is low or when the price rally starts, then the Buy More strategy combined with the OCO option will be a great fit for you. The idea behind this approach is to purchase coins at the lowest price possible or when the resistance breakthrough happens - both options will provide a benefit from the momentum effect or trend reversal.
The Buy Dip order should be "Limit" to purchase more coins if the price goes down.
The Buy on Breakthrough should be a Stop order if the price goes up.
If the price will break the key resistance and continue the uptrend, then the system will cancel the Limit order on the bottom to release the funds and use them for the Stop Buy order.
Exit or Averaging Down
The other strategy sells your coins at an acceptable price or averages the buy price down, allowing you to sell the base currency afterward at a lower price. To do so, we would need to combine 2 Limit orders on Buy and Sell sides.
The Exit order should be a Limit Sell order which will sell all your coins at the desired price.
The Averaging Down order should be a Limit Buy order which will increase the number of coins you are holding and decrease your average purchase price.
If the price goes down and the system fills the Limit Buy order, then the top Sell order gets automatically canceled. Alternatively, if your Sell order gets filled, then the system will cancel the bottom Buy order because there is no need to average this coin anymore.
These were the 3 most popular uses of OCO orders and how to set them up. However, there are no limits, and you can use this feature to create your own profitable strategy.