Forex trading involves buying and selling currencies in the foreign exchange market with the aim of making a profit. One of the strategies used by traders is the use of order types such as the “One Cancels the Other” (OCO) order. This article will explain what a cancel order is and how to set up a trade that cancels another.
What is a Cancel Order?
A cancel order is an order placed by a trader to cancel an existing order. This order is used in situations where the trader wants to cancel an order that has not been executed or partially executed. This order can be used to close a position, limit a loss, or protect a profit.
How to Set Up a Trade that Cancels Another
To set up a trade that cancels another, a trader needs to use an OCO order. An OCO order is an order that consists of two or more orders, and when one order is executed, the other order is automatically canceled. This type of order is used to set up two orders that are opposite to each other, and when one order is executed, the other order is canceled.
For example, a trader can set up a trade to buy a currency pair at a certain price and set up another order to sell the same currency pair at a different price. If the buy order is executed, the sell order will be automatically canceled. If the sell order is executed, the buy order will be automatically canceled.
To set up an OCO order, a trader needs to follow these steps:
Step 1: Log in to your trading platform and select the currency pair you want to trade.
Step 2: Click on the “New Order” button or select “Order” from the menu.
Step 3: Select the type of order you want to place. In this case, select “OCO Order.”
Step 4: Enter the details of the first order, which can be the buy order or the sell order. Enter the amount you want to trade, the price you want to buy or sell, and the stop loss and take profit levels.
Step 5: Enter the details of the second order, which is the opposite of the first order. For example, if the first order is a buy order, the second order will be a sell order. Enter the amount you want to trade, the price you want to sell or buy, and the stop loss and take profit levels.
Step 6: Review your orders and make sure they are correct.
Step 7: Click on the “Submit” button to place your orders.
Advantages of Using an OCO Order
Using an OCO order has several advantages for traders. Firstly, it allows traders to manage their risk by setting up a stop loss and take profit level for both orders. This means that if one order is executed, the trader can still protect their profits or limit their losses with the other order.
Secondly, an OCO order allows traders to take advantage of market volatility. If the market moves in a certain direction, the trader can profit from the movement and cancel the other order.
Conclusion
In summary, a cancel order is an order placed by a trader to cancel an existing order. To set up a trade that cancels another, a trader needs to use an OCO order. This type of order is used to set up two orders that are opposite to each other, and when one order is executed, the other order is canceled. Using an OCO order has several advantages for traders, including risk management and taking advantage of market volatility.
