a one cancels the other oco order is a pair of conditional orders stipulating that if one order executes then the other order is automatically canceled an oco order often combines a stop order with a limit order on an automated trading platform when either the stop or limit price is reached and the order is executed the other order is automatically canceled experienced traders use oco orders to mitigate risk and enter the market 
oco orders may contrast with order sends order oso conditions that trigger rather than cancel a second order basics of a one cancels the other ordertraders can use oco orders to trade retracements and breakouts if a trader wanted to trade a break above resistance or below support they could place an oco order that uses a buy stop and sell stop to enter the market for example if a stock is trading in a range between 20 and 22 a trader could place an oco order with a buy stop just above 22 and a sell stop just below 20 when the price breaks above resistance or below support a trade is executed and the corresponding stop order is canceled conversely if a trader wanted to use a retracement strategy that buys at support and sells at resistance they could place an oco order with a buy limit order at 20 and a sell limit order at 22 if oco orders are used to enter the market the trader must manually place a stop loss order when the trade is executed the time in force for oco orders should be identical meaning that the time frame specified for the execution of both stop and limit orders should be the same example of an oco ordersuppose an investor owns 1 000 shares of a volatile stock that is trading at 10 the investor expects this stock to trade over a wide range in the near term and has a target of 13 for risk mitigation they do not want to lose more than 2 per share the investor could therefore place an oco order which would consist of a stop loss order to sell 1 000 shares at 8 and a simultaneous limit order to sell 1 000 shares at 13 whichever occurs first these orders could either be day orders or good til canceled orders if the stock trades up to 13 the limit order to sell executes and the investor s holding of 1 000 shares sells at 13 concurrently the 8 stop loss order is automatically canceled by the trading platform if the investor places these orders independently there is a risk that they might forget to cancel the stop loss order which could result in an unwanted short position of 1 000 shares if the stock subsequently trades down to 8 