An Easy Explanation of an OCO Order
Cryptocurrency trading has become highly prevalent these days. And, because of its volatile nature, more traders are getting involved in it.
While in the traditional trading of stocks, traders have to wait for a day or two to see a percent change in price. On the other hand, quickness and high flexibility of cryptocurrencies is making it a fun game for traders who love immediate profits. To invest in crypto market, you need some expert knowledge and the right strategy to earn profit. Cryptocurrency exchanges like Binance are offering a lot to traders to make profits like futures and margin trading, stop loss, OCO orders, and more.
Tons of cryptocurrency and trading strategies are offered by the best crypto exchange platform that work to make you rich. The best crypto trading platform makes sure that you can buy and sell cryptos easily.
If you want to maximize your chances of winning, you need to use advanced orders, and one such order type is using OCO order. This is actually a conditional order where two orders are placed simultaneously, with a rule in place enforcing that if one order is accepted, the other one will be cancelled automatically.
Placing an OCO order is an effective tool that will help traders to secure their profits and gains. Apart from having the right strategy, a trader also requires the best crypto exchange platform to place trades easily. TrailingCrypto is one such crypto trading platform that provides effective tools and advanced strategies to help traders maximize their gains in cryptocurrency.
Let’s understand OCO orders in deep:
An OCO (One-cancels-the-other) order is a type of conditional order which is often placed by the traders with a pair of profit and loss exit orders. If one of these orders is partially or fully filled, the other one will get cancelled automatically. Often an OCO order combines a stop order with a limit order on the automated crypto trading platform. Generally, this order type is used by the expert crypto traders to mitigate the risks.
An OCO order is a kind of risk management tool which is often overlooked by the traders. Planning forward and knowing what kind of risk management tools to implement while trading crypto is the core of managing your trading portfolio.
This order type not only limits the losses of the crypto traders, but also locks-in their profits by placing two orders simultaneously.
Let’s understand it with an example:
While opening a long position on Bitcoin, two sell orders will be placed, determining the gain and loss exits.
So, if the entry Buy Order is executed, two sell orders (one gain and one loss) above and below the initial entry price will be placed respectively as per the set parameters.
These orders will not be the market orders. The gain order here will be the limit order which goes directly to the exchange where it’s held.
And the loss order will be the stop order. It’s stored locally on the platform and will be executed only if the set price is reaced.
Ultimately, regardless of the price movement, only one order is executed and remains active. Trade automation is vital for success in the volatile crypto market. And, this is what an OCO order achieves.
Usually, an OCO order combines a take profit (limit sell) order with the stop loss (stop-limit) order. If one order executes, then the other order will get cancelled. Say, if the market is experiencing price gaps as well as sharp price movements, there might be chances that a trader may not be able to open a position at the predefined level. But, setting an OCO order is the solution to all such risks that occur in unplanned trading environment.
When can an OCO order be used?
When trading on Binance exchange, you can use OCO order as a basic form of trade automation. After logging in to your Binance account, you can go to the basic exchange interface and may find the trading area. Click on stop-limit order to open a drop-down menu and select OCO.
An OCO order can be placed as a pair of buying and selling order. After clicking on the OCO order option, you will see a new interface which will further allow traders to set a limit and the stop-limit order simultaneously.
After placing an OCO order, you can scroll down to visualize the details about both the orders in “open orders” section.
For instance, you just bought 5 BNB at 0.0026837 BTC as you believe the price is closer to the major support zone and will go up as predicted.
Here in this case, you may choose OCO feature to place a take-profit order at 0.0030 BTC along with setting a stop-limit order at 0.0024900 BTC.
If your assumption is correct, and the price of BTC rises to or above 0.0030 BTC, a sell order will be executed and the stop-limit order will get cancelled.
But, on the other side, if your prediction goes wrong, and the price falls down to 0.0024950 BTC, then a stop-limit order will be triggered. This will minimize your losses potentially, in case, the price drops down even more.
Point to be noted: In the above example, the Stop Price is 0.0024950 (trigger price) and the Limit Price is 0.0024900 (the trading price of your order).
All this means that the stop-limit order would be triggered at the moment the price for BTC reaches to 0.0024950mark. But, the actual trading price of your order would take place at 0.0024900. On the other side, if BNB/BTC drops to or below 0.0024950, a limit sell order at 0.0024900 will be placed.
The OCO feature is a simple yet powerful tool, which allows you and other Binance users to trade in a more secure and versatile way. This is a special type of conditional order which can be useful for locking profits, limiting risks, and even for entering and exiting positions. Still, it’s important for a trader to have a better understanding of limit and stop-limit orders before using OCO orders.
How does an OCO order work?
Often the OCO orders are used in crypto trading as a way to link a stop loss order (used to cut a loss) with a limit order (used to capture a gain). Once the crypto asset price hits a stop loss price target, there is no need for the other order to take profit on the same crypto coin, or vice versa.
For example, if a trader owns the coins of any cryptocurrency say, XYZ, currently trading for $25 per coin. He believes that the coins are undervalued, and expects the price to reach another $20. To make sure he locks in the gains, the trader places a sell limit order for $45, the maximum price at which he wishes to hold the crypto coins. He also places a trailing stop order for $10, which will sell the crypto assets if it drops $10 from its current high. As the prices climb to $45, the trader's sell limit order is triggered, selling his coins, and cancelling his trailing stop.
Let’s understand OCO orders with another example:
Price limits on OCO orders:
For OCO sell orders, the prices have to follow the following rule:
Limit price of limit maker order > Market price > Stop price of stop-limit order.
For OCO buy orders, the prices have to follow the following rule:
Limit Price of limit maker order < Market price < Stop price of stop-limit order.
Say, if the last price for any crypto asset is $30, the sell OCO order must have a limit price greater than $30, and the stop price must be less than $30.
And, on the other side, the buy OCO must have the limit price lesser than $30, and the stop price should be greater than $30.
A trader has 300 USDT in your crypto exchange account, and he thinks that the overall trend of the ETH/USDT market is going up.
Now, you want to enter the market at a reasonable price. The last traded price of ETH is 28.05 USDT, and the resistance is around 29.50 USDT. You want to buy ETH when it hits 27.00 USDT, but you also don’t want to miss out on the opportunity when the price breaks the resistance price.
Therefore, you can place an OCO order with a quantity of 10, which combines a limit buy order and a stop limit buy order. The price of the limit maker order is 27.00 USDT. For the stop limit order, the stop price is 29.50 USDT and the limit buy price is 30.00 USDT.
Select OCO order in the drop-down box
Specify limit price as $27, and stop price at $29.5 with a quantity of 10
Click buy ETH to submit an order
Once the orders are submitted, one can review the existing orders in the open orders section.
How to place an OCO order on Binance?
In crypto trading, OCO orders provide a way to traders to sell any crypto asset at a higher price or to place a stop limit to sell if it goes below a certain price.
To set this, you need to click on the arrow beside the OCO and select OCO from the list.
This will add more fields where you can place your price and quantity. Let’s see what those fields are below.
On Binance, OCO order has two sections saying limit order and stop-limit order.
You can consider limit as selling for profit and stop-limit as an order to minimize losses.
Say, any trader bought LTC at $70. Now the price for LTC is trading for $67.
Now, he wants to sell it if it goes beyond $76.06 and make $6.06 profit. However, if it falls below $64.55, the trader wants to sell it off to limit the loss to about $6.5.
While placing the same order on Binance in these fields, two orders will be created. One is limit-maker, and the second one will be stop-limit.
The first order is the limit order to sell LTC at a higher price. Order gets executed if the price reaches $76.06 and you will get $76.06 for selling 1 LTC.
And, second-order is a stop-limit order. In this case, you have set it to trigger if the price of LTC goes below $64.67 and to sell at a price of $64.55. This will give you $64.55 when it sells 1 LTC. If anyone of these two orders gets executed, the other one gets canceled as there would be nothing to sell. That’s OCO — One Cancels the Other.
Using OCOs to close an order
The most common way to use an OCO order is when a trader is about to enter the market but would like to attach a Stop & Limit to the position.
Let’s say, a trader wants to buy 100 BTC in Binance at the current market price. You will also see a Stop at $848 & a limit at $855. This means that as soon as ‘Place Trade’ is clicked, the trader will hold 100 BTCs, with a stop at $848 and a limit at $855.
If either of these attached orders is triggered, the position will be closed and the opposing order will be cancelled.
OCO orders are beneficial for the traders if they don’t have time to watch the charts constantly, and reacting to the market as the price action unfolds.
You could use an OCO order so that your response to a certain price is pre-determined. This allows traders to take the advantage of such opportunities automatically. One of the best ways to use OCO orders is to use the resistance and support levels.
If there is a strong downward trend, and you think that the price will move down, you could request a buy order just below the support level and a buy order above the support level with an OCO order when there is a short position.
Placing an OCO order on Binance via TrailingCrypto
The traders can place an OCO order at Binance exchange, and via TrailingCrypto one can directly place an order on the Binance platform too. In trading terms, OCO orders are the best way to sell a crypto asset at a higher price or to place a stop limit to sell it if the price goes below a certain price.
How to place OCO order on TrailingCrypto:
Create an account on TrailingCrypto and log in.
On settings page enter your API Key and Secret key
Select exchange, say Binance. (A drop-down menu on the top left)
Select Base and Quote coin. E.g. Market: BTC
Select the number of coins needs to be sold. E.g. 5 coins. (quantity could be in the fraction)
Fill the Stop Loss fields. Refer to Stop Loss.
Fill the Take Profit fields. Refer Take Profit
A hypothetical example to understand an OCO order:
Suppose the current market price of BTC is $100. Now someone placed an OCO order with Taking Profit at $110 and Stop Loss at $90. If the market hits $110 then, the Take Profit option will be executed and at the same time, the Stop Loss order will be canceled.
Imagine if the market doesn’t go well, and the price hits $90. This time stop loss order will be executed and at the same time take profit order will be canceled out.
OCO orders are the unique type of conditional orders which are best in reducing risks and sealing profits for entry and exit orders. Make sure to have a complete understanding of limit and stop-limit orders to understand the depth of using OCO orders.
The best crypto trading terminal like TrailingCrypto support both basic and advanced order types including stop-loss orders, take profit, OCO orders, and more. TrailingCrypto allows its users to trade cryptocurrencies in a safer and versatile way. It allows you to trade automatically via crypto trading bot to place orders on your behalf without watching the market.
A deep understanding of the market and trading methods is must to place this order smartly.
