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What does OCO stand for?
OCO is an abbriviation for ‘One Cancels The Other’. It is a good way to place a limit order and a stop-limit order at the same time, with only one of the two being executed.
This means that you effectively manage your risk by placing a take-profit order and stop-loss order at the same time. This was not always an option, as OCO orders were not possible with spot trading pairs. By using OCO orders, you effectively automate most of the trading and reduce the need to actively monitor the trade.
Limit orders place orders in the order book for the desired buy/sell price per token, rather than using market orders where tokens are sold at the best available market price at the moment.
Most common orders are;
Stop limit order: an order that helps to manage your risk. This transaction closes your position (partially), locks in losses and prevents further losses.
Take-profit order: an order that (partially) locks in profits.
How do you use OCO orders?
OCO orders are very easy to use on Binance, and can be set up in just a few minutes. First, it is important to open a position using a limit buy order or a market buy order.
Once the position is open, you can follow the steps below to place an OCO order.
Suppose you bought 1 ETH at a price of $4,150 and want to sell 1 ETH at $4,500. But you also want to make sure you don’t lose more than $150. Therefore you want to place a stop-loss at $4,000.
First you navigate to the correct trading pair, which is ETH/USDC. Then you scroll down to the trading menu and hover over stop-limit, there I select OCO.
Then proceed to enter $4,500 on ‘Price’ because this is where you want to take profits. And fill in $4,000 on ‘Stop’ and ‘Limit’. ‘Stop’ is where the stop-loss order goes in, while ‘Limit’ is the price it’s actually set to sell at
You could choose to set this as, say, $4,025 stop and $4,000 limit, but normally this is not necessary. Then enter ‘1’ on the amount and then press ‘Sell ETH’ as shown in the image below:
After placing the OCO order, you can view both the take-profit and stop-loss orders in the ‘Open order’ section at the bottom of your screen. Now you can wait until either your goal is reached, or choose to cancel the order and replace it with another value.
That’s all there is to further automating and managing your trades!