Disclaimer: This article is for educational purposes only. The information provided by Binance is not investment advice or trading recommendations. Binance is not responsible for your investment decisions. Please seek professional advice before taking any financial risk. The products mentioned in this article may not be available in your region.
Key points
The 'One Cancels Other' (OCO) order allows you to place two orders simultaneously. If one of them is executed, the other is automatically canceled.
Understanding limit orders, limit stop orders, and the general conditions for setting orders is crucial for effectively using OCO orders.
OCO orders can make trading more versatile and secure by locking in profits, limiting risks, and automating entry and exit from positions.
Note: Before reading this article, we strongly recommend reviewing our guides on limit orders and limit stop orders.
What is an OCO order
An OCO order, or 'One Cancels Other', allows you to place two orders simultaneously. It combines a limit order with a limit stop order, but only one of them can be executed.
In other words, once one of the orders is partially or fully executed, the other is automatically canceled. Note that canceling one order will result in the cancellation of the other.
While trading on the Binance exchange, you can use OCO orders as a basic form of trade automation. This feature allows you to place two limit orders simultaneously, which can be useful for locking in profits and minimizing potential losses.
How to use OCO orders
After logging into your Binance account, enter the trading area, as shown below. Click on 'Stop-Limit' to open the dropdown menu and select 'OCO'.
OCO orders on Binance can be placed as a pair of buy or sell orders. You can also view information about OCO orders by clicking on the 'i' icon located nearby.
After selecting the OCO option, a new trading interface will load. It allows you to set a limit order and a limit stop order simultaneously.
After placing an OCO order, you can view the details of your trades in the Open Orders section located below.
Limit order
A limit order allows you to buy or sell an asset at a specific price. It appears in the order book and will be executed only at the price you set or a better price.
Limit stop order
This is a two-step process that involves:
Stop: the price at which your limit stop order will trigger (for example, 553.34 USDT). Note that in the OCO order interface on Binance, this is referred to as Stop-Loss (or SL activation price).
Limit: the actual price of the limit order after the stop is triggered (for example, 553.24). Note that in the OCO order interface on Binance, this is referred to as Limit SL.
Quantity: the size of your order (for example, 5 BNB).
Total: the overall cost of your order.
Conditions for setting an OCO order
For sell orders:
When you have a long position open, you can set the Stop Price just below a key support level to minimize potential losses. If the price drops, this triggers the stop-loss order. Support levels can act as safety nets and are determined based on past behavior, where assets typically attract buyers' interest.
To increase the chances of execution, you can set the Limit Price (Limit SL) slightly below the Stop Price, as we did in the example below (SL activation price at 553.34 and Limit SL at 553.24). If the Limit SL is set above or equal to the SL activation price, there is a higher chance that the order will remain unexecuted, especially if the price drops too quickly.
For buy orders:
When you have a short position and want to use a buy order as a stop-loss, you can set the stop price slightly above a key resistance level to minimize potential losses. If the price rises above the resistance level, your stop-loss will trigger a buy order.
Unlike support levels, resistance levels are areas where the price of the asset is typically under selling pressure. For short positions, these levels can act as safety nets and are also determined based on previous price movements.
To increase the chances of execution, you can set the Limit Price (Limit SL) slightly above the Stop Price. If the Limit SL is set below or equal to the SL activation price, there is a higher chance that the order will remain unexecuted, especially if the price rises too quickly.
OCO orders in practice
Consider the price range below the trading pair BNB/USDT. The white line at the top represents a resistance level around $590, and the white line below represents a support level around $560.
Now imagine you want to open a long position in this price range. The current price is $577.46, but you want to wait for a better entry point closer to the support level (the white line below). Let's say your desired entry price is $562.91.
If the price does not drop to your desired entry point, you will not make the trade. But if it does drop, you will open a trade with your target at $589.52, and your stop-loss will be at $553.34.
If the price follows the blue trajectory, your trade will incur losses as the stop-loss will trigger ($553.34). For your trade to be profitable, you want the price to follow the path of the yellow arrow (entry at $562.91 and take profit at $589.52).
In this scenario, the OCO order can cover all potential outcomes, ensuring a profit if the price moves as you expect and limiting losses if the trade does not go as planned.
In our example, the Stop Price is 553.34 USDT (activation price), and Limit SL is 553.24 USDT (the price at which the order will be placed). This means that your limit stop order will be activated when the price reaches or falls below 553.34, and the limit sell order will be placed at 553.24 USDT. However, keep in mind that if the price drops too quickly below 553.24, the limit order may not be executed.
In simple terms, if BNB/USDT drops to 553.34 or lower, a limit sell order will be placed at 553.24.
In conclusion
OCO is a simple yet powerful tool that helps users of the Binance cryptocurrency exchange trade more safely and flexibly. This type of order can be useful for locking in profits, managing risks, and even for entering and exiting positions. However, before using OCO orders, it is crucial to have a deep understanding of limit and stop-limit orders. This knowledge will help you feel more informed and prepared for trading.
Recommended reading
What is a limit order
What is a limit stop order?
Five risk management strategies
Risk warning and disclaimer: The following materials are provided on an 'as is' basis without any guarantees solely for general reference and educational purposes. This information should not be considered financial, legal advice, or a recommendation to purchase any specific product or service. You should seek advice from appropriate professional advisors independently. As the article is written by a third-party author, please note that the opinions expressed belong to the third-party author and do not necessarily reflect the views of Binance Academy. For more detailed information, please follow the link. The value of digital assets can be volatile. The value of invested funds can increase and decrease. You may not recover your invested funds. You bear full responsibility for your investment decisions. Binance Academy is not responsible for any potential losses you may incur. This information is not financial, legal, or professional advice. To learn more, please review our Terms of Use and Risk Warning.
