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Hedging without headaches: What is an OCO order in crypto?

Thomas Sweeney

Jul 1, 20255 min read

Managing risk is a foundational skill when trading cryptocurrencies. Even if traders have high convictions on short-term strategies, there's no knowing how the market will move day by day. The primary way crypto traders tame this inherent unreliability is with automated tools that have pre-set buy and sell levels. With these predetermined prices in place, crypto traders can rest a little easier knowing there's only so much they could lose. 

One specific strategy crypto traders use in this category is a one-cancels-the-other (OCO) order. In this guide, we’ll explain how OCO orders work and how they can help traders navigate market volatility with predefined buy and sell levels.

What is an OCO order? Explaining OCO in trading 

Although the term "OCO order" might sound like a single-step strategy, it’s actually a combination of two linked orders placed simultaneously. These orders are set at different predefined price levels – typically one as a stop-loss and the other as a take-profit. The "canceling" aspect of an OCO order means that when one order is executed, the other is automatically canceled. Traders often use OCO orders to manage risk and lock in profits while reducing the need for manual trade execution.

How does an OCO order work?

OCO orders typically involve two sell orders: a "take-profit" and a "stop-loss." The take-profit order is at the high end of a cryptocurrency's trading range and represents the maximum gain a trader wants to realize in their setup. In contrast, stop-loss orders are on the low end and trigger a sell below a crypto trader's cost basis. Take-profit orders tame a trader's greed by forcing them to take profits, while the stop-losses pull traders out of a losing position to avoid a potentially greater downside.

For example, suppose a trader buys one Bitcoin (BTC) for $95,000 and wants to take profits at $100,000 while limiting losses at $94,000. They could set up an OCO order with:

  • A take-profit order at $100,000, which executes if BTC reaches this price
  • A stop-loss order at $94,000, which triggers a sell if BTC drops to this level

If Bitcoin rises to $100,000 before hitting $94,000, the take-profit order executes, and the trader secures a $5,000 profit. However, if BTC first falls to $94,000, the stop-loss triggers, closing the position with a $1,000 loss, even if BTC later rebounds to $100,000.

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What are common types of OCO orders?

The basic tactic in an OCO order is always to place two sell requests at the same time to both define and automate the parameters of a trade. There are, however, a few specific orders traders can use to add greater specificity to their strategies. 

Take-profit and stop-loss OCO orders

The standard way to construct an OCO order is to place a firm price level above and below a cryptocurrency's current price range to set profit targets and loss limits. With this technique, traders use limit orders to secure a specific sell price or stop-limit orders to trigger a sell when the market reaches a certain level. Limit orders execute only at the pre-set price, giving traders control but no guarantee of execution in volatile markets. Stop-limit orders introduce a trigger price that converts into a limit order, helping traders manage risk while avoiding immediate market fluctuations.

Stop-limit OCO orders

Unlike standard take-profit and stop-loss orders, stop-limit orders introduce an extra pricing parameter before executing a trade. This is because a stop-limit order has two price levels rather than one: a stop price and a limit price. When the market reaches the stop price, it triggers a limit order, which then executes only at the limit price or better. This approach gives traders more control over their exit strategy but does not guarantee execution, making it particularly useful during volatile periods.

Breakout OCO order

When traders expect a cryptocurrency to break through a specific price ceiling, they may use OCO orders to capitalize on short-term volatility while managing risk. Typically, traders first identify a key resistance level by analyzing price charts and using technical tools to assess past patterns. Once they pinpoint this resistance, they set a take-profit order above it, anticipating a bullish breakout. At the same time, they place a stop-loss order near key support levels to limit potential losses if the trade moves against them.

Trailing stop OCO order

Trailing stop orders are dynamic sell requests that adjust with the real-time movement of a digital asset, only triggering a sell if the price drops by a pre-set percentage from its highest point. For example, if a trader sets a 5% trailing stop, the stop price increases as the asset’s price rises but remains fixed if the price starts to fall. The sell order is triggered only when the asset declines 5% from its peak.

The advantage of trailing stops over take-profit orders is that they allow traders to capture more gains if the asset continues climbing as the stop price trails upward. For even greater control, traders may also place a separate limit order at a specific profit target to lock in gains if the price surges.

‘Good 'til canceled’ vs. day OCO orders

When setting up an OCO order, crypto traders can also adjust the order's duration. If traders prefer to close their positions within the same trading day – or avoid the risk of holding overnight – they can select a "day" OCO order, which expires at the end of the day if neither order executes.

Alternatively, a "good 'til canceled" (GTC) OCO order remains active until one of the orders is filled or the trader cancels it. Some platforms may impose expiration limits on GTC orders, such as 30 or 90 days. The advantage of GTC orders is that traders don’t need to actively monitor their platform until one of the orders executes. However, if market sentiment or news shifts, traders must manually modify or cancel the order to adjust their strategy.

When to consider placing an OCO order in crypto

While OCO orders may limit potential gains or realize losses before a rebound, they offer key advantages as a predefined strategy. By setting precise levels, OCO orders remove much of the guesswork from risk and reward management, helping traders overcome emotion-based indecisiveness.

  • Risk management strategies: OCO orders add structure to a trader’s portfolio by defining clear exit points – either locking in profits or cutting losses at predetermined levels. While market movements remain unpredictable, OCO orders provide a controlled, rules-based approach with only two possible execution outcomes.
  • Avoiding emotion-based decisions: Another advantage of OCO automation is that it helps traders stay disciplined, preventing decisions driven by greed or fear. By predefining exit points, traders reduce the temptation to second-guess their strategy in real time.
  • Breakout trading: When traders anticipate a strong price movement past key resistance or support levels, OCO orders allow them to speculate while managing risk. By placing a buy stop slightly above resistance and a sell stop below support, traders can position themselves for potential breakouts while minimizing losses if the move fails.  
  • Day or swing trading: Short-term traders often use OCO orders to manage high-risk trades without constantly monitoring the market. Since crypto markets operate 24/7, OCO orders help traders execute their strategies even when they’re away from their screens.

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Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.

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