OCO Orders
MF Global FX is pleased to announce that a new order type has been added to its order execution on the FX Trading Station II platform.
OCO stands for “One-Cancels-the-Other” and is a valuable tool for trading either a “breakout” or a “pullback”.
Simple OCOs
“Breakout”
A breakout is, as the name suggests, a breaking out of the pre-existing trading range. When this occurs after a lull in range trading, the currency pair tends to gain momentum in the direction of the breakout. Trader can take advantage of this opportunity by buying or selling the breakout with the help of an OCO Order.
Trader identifies the recent range of a currency pair and places an OCO Order to buy just above the recent range high and to sell just below the recent range low. Each leg of the order has an attached Stop Distance which must be a value <0 and Limit Distance which must be a value >0. When one leg of the order (either the Buy or the Sell) executes, the position is protected with a Stop and a Limit, and the other leg of the order cancels.
There is also a Trailing Stop option.
For example, Trader identifies the recent range of EUR/USD between 1.4510 and 1.4610. After analyzing his charts, he decides that if this range is to break on either side, price momentum may accelerate. Trader places an OCO Order to buy at 1.4630 with a Stop Distance of 20 pips (-20.0) and a Limit Distance of 80 pips (80.0), or to sell at 1.4490 with a Stop Distance of 20 pips (-20.0) and a Limit Distance of 80 pips (80.0).
This means that, if the Buy Order executes, Trader will have a long position at 1.4630 (assuming no slippage) with a Stop at 1.4610 (20 pip stop-loss) and a Limit at 1.4710 (80 pip take profit). The Sell leg of the OCO Order at 1.4100 cancels.
If the Sell Order executes, Trader will have a short position at 1.4490 (assuming no slippage) with a Stop at 1.4510 (20 pip stop-loss) and a Limit at 1.4410 (80 pip take profit). The Buy leg of the OCO Order at 1.4630 cancels.
“Pullback”
A pullback is, as the name implies, a corrective move which pulls the price back to a previous breakout level. When this occurs, Trader takes this opportunity to buy or sell to re- establish a position in the direction of the trend with the help of an OCO Order. It also allows Trader to position for a minor countermove in the trend.
Complex OCOs
Despite its name, complex OCOs are not complex at all. This type of order allows Trader to obtain an exposure to a particular currency through its pairings with other multiple currencies.
For example, the U.S. Dollar is gaining strength but Trader determines that to be temporary. He would like to take advantage of this pullback to sell into U.S. Dollar strength by buying either the Euro or the Pound.
Trader analyzes his charts and decides to create 2 separate Entry Orders – one to buy 10K EUR/USD at 1.4450, and the other to buy 10K GBP/USD at 1.6050, with the execution of the first order to cancel the other.
Separate Entry Orders
Link the Entry Orders
Right-click on the EUR/USD Entry Order and select “Complex OCO”. A “Complex OCO” window opens up and the EUR/USD order appears in “OCO Order” at the bottom while the GBP/USD order appears in “Available Orders” at the top. Highlight the GBP/USD order and click “Add” and the 2 orders are now linked as a Complex OCO.
Separate Entry Orders Linked as Complex OCO
For a more detailed description of OCO orders, please visit the Help section on the Trading Station. Click on [Help] inside the menu bar at the top left of the trading screen, then select [Contents].
