Leaving an order to deal at a certain price away from the current level of the market can be a convenient way to trade Forex. It can help to enforce discipline on your trading, as well as saving you the trouble of monitoring the market as you wait for the right price.
While you may already be conversant with using simple orders to trade, you might also be interested in what is known as a one-cancels-other order or OCO order. An OCO order is a slightly more advanced type of order. This article is going to explain how they work and explore what kind of scenarios they are suited to. Of course, if you do want to brush up on basic orders, why not take a look at our Stop-loss And Take-profit article.
An OCO order is, in fact, a pair of orders that are linked together with a kind of order management. This order management ensures only one of the orders is ever executed. As the name suggests, if either of the two orders is executed, it automatically cancels the remaining order.
This differs from plain vanilla stop or limit orders which are discrete instructions to buy or sell the market if certain price conditions are met. Such orders are not linked to the outcome of any other order and continue to operate until executed, cancelled or until expiry (such as a day order). OCO orders are useful because it can help 'clean up' orders that are no longer wanted.
Let's talk about how you can use OCO orders in MT4.
OCO orders are not included in MT4 as a default. If you would like to use them, you need to download an Expert Advisor (EA) in order to add the functionality to the platform. An EA is an automated process that allows you to place trades according to specific rules.
If you perform a web search for OCO orders, you will find there is a dearth of highly recommended EAs out there for this purpose. I always prefer to have functionality like this come from a reliable source, though, which is why MetaTrader 4 Supreme Edition (MT4SE) is so handy.
MT4SE is a free, custom plugin that offers a wide selection of EAs and indicators, all of which have been handpicked and crafted by industry professionals. This means you can rely on them to work in an expert fashion. Among the EAs provided with MT4SE are OCO orders.
Access to the OCO functionality in MT4SE is via the mini terminal, a special feature that makes opening and managing positions easier. The mini terminal includes order templates that make it simple to place a wider variety of orders, including OCO orders.
So, let's take a look at how it works.
The first thing you need to do is install MetaTrader 4 Special Edition. Once you have done that, you will be able to see all the additional indicators and EAs in MT4's Navigator. From these, you just need to select Admiral - Mini Terminal, as shown in the image below:
To open the menu for placing orders, click on the orange icon in the top right hand corner of the mini terminal. Ensure the Allow automated trading setting is activated, as this is required for EAs to function. There are two types of OCO orders available with MT4SE.
Which one suits you best will depends on you Forex OCO strategy of preference.
You would use this order template if you expect the price to breakout clearly in one direction but are unsure if it will be up or down. The order template therefore places two Stop levels — one to buy above the current price and one to sell below the current price.
If the market trends up, you will be buying into the rising market. If the market trends down, you will sell into a falling market. This therefore allows you to capitalise on a big market movement without having to predict the direction.
In the image above you can see I have selected OCO breakout for the Order type and selected a stop to buy and a stop to sell with an entry price 50 pips away for each. If the market rises 50 pips, the stop order to buy will be executed and the sell stop will be cancelled. Conversely, if the market falls 50 pips, the stop order to sell will be executed and the buy stop will be cancelled.
Scenarios in which you could use such a strategy might include the release of economic figures or during an important press conference. Basically, times at which you judge a major price move as likely, but when there is uncertainty over which way that move will be. Our Economic Calendar can help you identify impactful events on the horizon.
In the image above you can see I have selected OCO reversion and chosen to place my two limit orders 60 pips either side of the current price. Now, if the market rises 60 pips, my sell limit will be executed and my buy limit will be cancelled. If the market instead falls 60 pips, my buy limit will be executed and my sell limit cancelled.
I have also this time chosen to add a stop-loss and a take-profit to my position if executed, both being 50 pips from my entry price.
You might use this type of Forex OCO order when you think you have identified price levels that are likely to result in a reversion to the mean. In other words, trying to place the entry price for your limit orders at resistance levels and hoping the price will rebound from these points.
To appreciate the advantage of an OCO order over simply using two separate, discrete orders, consider a scenario where you are looking for a breakout. Let's say that you are expecting a sharp move in EUR/USD over a forthcoming announcement from the Fed.
You decide you would like to place a stop order to buy 80 pips above and the market and a stop order to sell 80 pips below the market. Now you could just do this as two separate orders, or you could choose to do it all using the OCO breakout template. The disadvantage of the former, is that if the sharp move happens, you are still left with the other order left working. If you no longer want that order — and you probably don't — you would have to go to the trouble of manually cancelling it. With the OCO order, it is neatly removed for you automatically so that you don't have to worry about getting a subsequent fill in the remaining order.
As we have seen, OCO orders allow you to place two orders simultaneously, of which only one can ever be executed. We ran through some basics scenarios in which these might be useful, but for more strategy ideas why not read our article on The Best Forex Strategies That Work.
You may find that OCO orders dovetail more conveniently with certain strategies than others; the best way to discover what really works best for you is to give it a go. The good news is that our Demo Trading Account is the perfect, risk-free environment to familiarise yourself with how OCO orders work and to try your ideas out. Whatever strategy you choose, we wish you the best of luck.