How OCO Orders can Limit Your Crypto Trading Risks and Locking in Profits in a Better Way?
The crypto trading market is very attractive to both novice and experienced traders. And, because of its high volatility and strong market trends, more and more traders are getting involved in it. If you loved this post and you would certainly like to obtain even more facts regarding solana playground create token kindly see our page. In the traditional stock trading, traders have to wait for some time to see a percentage change in the market and its price. But on the other side, the quickness and volatility of cryptocurrencies are making it a more profitable game for the traders looking for immediate profits.
To invest in the crypto trading market, one must have some expert knowledge and strategy to earn good profits. They need to make use of some advanced tools and the right methodology to understand the market in a better way. Cryptocurrency exchanges like Binance are offering advanced tools and order types to make profits like margin trading, futures trading, trailing orders, OCO orders , and more.
If you really want to maximize your profits in crypto trading, you need to choose the best crypto trading platform offering the right tools and advanced strategies to traders. One way the crypto traders can manage the increased risk in the crypto market is by incorporating one-cancels-the-other (OCO) orders in their trading strategy. These orders help traders to lock in their profits, manage risks, and entering or exiting the positions easily.
So, are you curious about how to include OCO in your arsenal of the crypto trading risk management tool? Let’s understand what OCO is and how to use it?
OCO order
An OCO is actually a pair conditional orders which specifies that if one order fills, the other will be canceled automatically. This type is commonly used to manage the risks in the open trade.
Also referred to as bracket order, this involves two traditional orders which include a stop and limit order. The stop order is placed at a specific price below the current market, such that if the price is triggered, will convert into a market order. On the other side, limit order which is also placed at a specific price, has a price location better than the current market price.
Let’s understand this with an example:
If Bitcoin (BTC) is trading at $60,000, a stop order to buy the asset would be placed at a price above the current market price and the stop to sell would be placed below the market price.
Additionally, a limit order to sell is placed above the current market price, while a limit to buy is placed below the market price.
The grouping of these two orders is conditional because they cannot be executed at the same time. Here, one of the two orders will cancel when the other executes. This order works on a first-come, first-served basis.
The order which executes first will stay, while the remaining will be canceled. Let’s know about OCO with another example:
If a user enters a long position at the price of $100, they can set a stop Order at $110 to activate profit-taking and then a Limit Order at $105 to minimize potential loss.
If the price hits $110, the Stop Order will be triggered, and the Limit Order will be automatically cancelled.
If the market is experiencing price gaps as well as sharp price movements that occur in the unplanned trading environment, the trader may fail to open a position at a predefined level. And, at this moment setting an OCO is the perfect solution. Traders can use an OCO to either enter long or short positions.
There are three general scenarios when a trader will want to utilize OCO order:
Managing risks in open positions
Trading when breakouts occur
Deciding between buying two different cryptocurrencies
How OCO order works?
Traders can place OCO orders to trade breakouts and retracement. If you want to trade a break above resistance or below support, you can place an OCO which uses a stop sell or buy stop order.
For example, if a crypto coin say, ABC is trading in a range between $150 and $200, a trader could place an OCO order with a buy stop just above $200, and a stop sell just below $150. Once the price breaks above or below the set limit, a trade will be executed and the second one will be canceled.
Conversely, if a trader wants to apply a retracement strategy, they could place an OCO order with a buy limit order at $150, and sell limit order at $200.
Most often, the OCO orders are used in crypto trading as a way to link a stop loss order with a limit order. Once the price hits the stop loss target, there is no need for the other order to take profit on the same asset.
Conclusion
Trading with OCO order effectively helps both the novice and professional traders. Rather than watching each tick of the market, it’s better to use OCO orders as they can manage the risks using automation. OCO orders are also referred to as bracket orders which are best in reducing the risks and locking in the profits for entry and exit positions.
The best crypto trading terminal TrailingCrypto allows its traders to use OCO Orders to trade cryptocurrencies in a much safer and versatile way. It should be noted that OCO orders require skillful execution and a deep understanding of the market, and the best crypto trading terminal will help traders in a right manner.
