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Key Points
A 'One Cancels the Other' (OCO) order allows you to place two orders simultaneously, where one order's execution will automatically cancel the other.
Understanding limit orders, limit take profit and stop loss orders, and general order setting conditions is crucial for effectively using OCO orders.
OCO orders allow for more flexible and secure trading by locking in profits, limiting risks, and automating opening and closing positions.
Note: Before continuing to read, it is strongly recommended that you first read our guides on limit orders and limit take profit and stop loss orders.
What is a One Cancels the Other Order?
A One Cancels the Other (OCO) order allows you to place two orders simultaneously. It combines a limit order and a limit take profit and stop loss order, but only one can be executed.
In other words, as long as one of the orders is partially or fully executed, the other order will be automatically canceled. Please note that manually canceling one order will also cancel the other order.
When trading on the Binance platform, you can use OCO orders as a basic form of trade automation. This feature allows you to place two limit orders simultaneously, helping to take profits and minimize potential losses.
How to Use OCO Orders?
After logging into your Binance account, go to the trading area, as shown in the image. Click on 'Limit Take Profit and Stop Loss', open the drop-down menu, and then select 'OCO'.
On Binance, OCO orders can be placed as a pair of buy or sell orders. Click the 'i' icon to view relevant details about OCO orders.
After selecting the OCO option, a new trading interface will load where you can set both limit orders and limit take profit and stop loss orders simultaneously.
After placing an OCO order, you can scroll down to view the details of both orders in the 'Current Orders' section.
Limit Order
A limit order allows you to buy or sell an asset at a specified price. It will appear in the order book and will only be executed at the price you set or a better price.
Limit Take Profit and Stop Loss Order
The entire process is divided into two steps:
Take Profit and Stop Loss Price: The price that triggers your limit take profit and stop loss order (e.g., 553.34 USDT). Please note that this is marked as Stop Loss Price (or Stop Loss Trigger Price) on Binance's OCO order interface.
Limit Price: The actual price of your limit order after the take profit and stop loss are triggered (e.g., 553.24 USDT). Please note that this is marked as Stop Limit Price on Binance's OCO order interface.
Quantity: The size of the order (e.g., 5 BNB).
Total Amount: The total value of the order.
OCO Order Setting Conditions
Sell Order:
When you hold a long position, you can set the trigger price slightly below the key support level to minimize potential losses. If the price drops, the stop loss order will be triggered. The support level acts like a safety net, determined based on historical price behavior, where the asset usually attracts buying interest.
To increase the probability of execution, you can set the limit price (stop limit price) slightly below the trigger price, as shown in the example (stop loss trigger price is 553.34, stop limit price is 553.24). If the stop limit price is set above or equal to the stop loss trigger price, the likelihood of the order not being executed increases, especially in the case of rapid price declines.
Buy Order:
When you hold a short position and wish to use a buy order as a stop loss, you can set the trigger price slightly above the key resistance level to minimize potential losses. If the price rises and breaks through the resistance level, your stop loss setting will trigger a buy order.
In contrast to support levels, resistance levels are areas where the asset price may encounter selling pressure. For short positions, these price levels act like a safety net, also determined based on historical price behavior.
To increase the probability of execution, you can set the limit price (stop limit price) slightly above the trigger price. If the stop limit price is set below or equal to the stop loss trigger price, the likelihood of the order not being executed increases, especially in the case of rapid price increases.
OCO Order Practice
Taking the price range of the BNB/USDT trading pair as an example. The white line at the top is the resistance level around $590, while the white line at the bottom is the support level around $560.
Assume you want to open a long position within this price range. The current price is $577.46, but you wish to open a position at a better price closer to the support level (bottom white line). Assume your expected opening price is $562.91.
If the price does not drop to your expected entry point, you will not execute the trade. However, if the price drops to your expected entry point, you will open a position at a target price of $589.52 and a stop loss price of $553.34.
If the price trend follows the blue path, your trade will incur a loss because the stop loss order (at $553.34) will be triggered. If the price trend follows the path indicated by the yellow arrow, your trade will profit (opening price at $562.91, take profit price at $589.52).
In this case, the OCO order can cover all possible outcomes, ensuring that you take profits when the price trend meets expectations while stopping losses when the trading conditions are unfavorable.
In our example, the trigger price is 553.34 USDT (trigger price), and the stop limit price is 553.24 USDT (order price). This means your limit take profit and stop loss order will be activated when the price reaches or goes below 553.34 USDT, and a limit sell order will be placed at 553.24 USDT. However, please note that if the price quickly falls below 553.24 USDT, the limit order may not execute.
In short, if the price of BNB/USDT drops to 553.34 or below, the system will place a limit sell order at 553.24.
Conclusion
OCO orders are a simple yet powerful tool that allows Binance users to trade in a safer and more flexible manner. This special type of order helps lock in profits, limit risks, and even open and close positions. However, before using OCO orders, it is essential to thoroughly understand limit orders and limit take profit and stop loss orders. This will help you better grasp trading strategies and prepare adequately for your trades.
Further Reading
What is a Limit Order?
What is a Limit Take Profit and Stop Loss Order?
Five Risk Management Strategies
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