Prevent heavy losses with OCO orders and forge ahead in pursuit of profits
This article is aimed at FX beginners.
For intermediate and advanced traders, it may be too obvious, so
please skip reading.
“OCO” is one method of placing orders.
It stands for “One Cancels the Other,”
and think of it as a method to place two orders at the same time.
I frequently use this OCO order in day trading.
OCO (One Cancels the Other) can be used for both entry orders and exit orders, but
the recommended approach is to use OCO at the point of exit.
The reason is that it can prevent a large loss that you must absolutely avoid.
After taking a position, you may hold for several hours or, in some cases, until the next day.
After entering, it is impossible to constantly monitor the chart.
While scalping in seconds to minutes might be possible, in day trading
that is difficult.There are times you need to eat or bathe while holding a position.
Furthermore, after taking a position, if there is nothing else to do, you may even go out.
In such situations, you may often move away from the chart while holding a position.
In those times, you can set a take-profit (limit order) and a stop-loss (stop order) simultaneously
with an OCO order.
When the take-profit point is reached, the limit order is triggered, and
if the stop-loss point is reached, the stop order is triggered.
After taking a position, you set both profit-taking and stop-loss prices
simultaneously.
This prevents losses from expanding rapidly during sharp market movements, and
the stop loss is executed. If the market changes suddenly while you are away and you make unexpected profit, that would be pleasantly rewarding.
However, that is not always the case.
It can move the other way, so if you leave a position unattended all the time,
you will eventually incur a large loss.
In day trading, the big loss that must be avoided at all costs is
a large loss.
Always use OCO orders to prevent losses exceeding expectations.
By doing so, you will not lose everything in a single trade.
It is unfortunate that the stop loss is triggered, but even if you are watching the screen,
you will be stopped out, so the result is the same.
In practice, if you are watching the chart, you may lose your composure and
delay the stop loss or average down (nampi n) more than you should.
It is good to think of it as something that prevents losses when you are not watching.
When I day-trade, my entry is always a market order.
While watching the chart, I time it and place the order with a click. I do not place new entries with a limit order.
I enter by sight.
And at exit, I use OCO orders.
When watching the chart, exiting is typically done with a market order.
When away from the screen, be sure to set an OCO order.
Even during trading, after you have some unrealized profit, set an OCO order
and also analyze other currency pair charts.
To summarize, as follows:
My order method
・Entry = market order
・Exit = market order or OCO order
Indeed, if you use OCO properly, you are unlikely to incur large losses. Therefore, there is no reason not to use it.
If there are no large losses, you can focus on profitable trades and
improve the rules.
In day trading, preparation before taking a position is extremely important.
Rather than panicking after taking a position,
once you enter, set OCO and wait patiently.
Rather than worrying about when losses will occur,
it would be nice to look forward to the take-profit triggering.