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OCO vs bracket, when would you apply?


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OCO vs bracket, when would you apply?

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  #1 (permalink)
Burlington, ON Canada
 
 
Posts: 18 since Feb 2021
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I've been trying to find the difference between an OCO order and a bracket order.

My understanding is OCO is essentially a bracket order.

So when would use a bracket order versus a OCO order?

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  #2 (permalink)
Elite_Member
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Trading in Canada View Post
I've been trying to find the difference between an OCO order and a bracket order.

The term bracket order in my book is when you have a stop loss order and exit target set in you platform order management settings to be entered automatically when you place the entry order. The entry and exit order are "brackets" above and below your entry order.

An OCO order can be placed after a trade is already on and you want to add a stop loss and target for the whole of that trade, or part of the position, so that when one side of the order is filled the other opposing order is automatically cancelled.

They are in effect the same thing, just placed in the market differently.

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  #3 (permalink)
Burlington, ON Canada
 
 
Posts: 18 since Feb 2021
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Thank you.

That was very confusing and I couldn't find anyone who explained better than you just did.

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  #4 (permalink)
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To my knowledge they are exactly the same thing, but every platform call them differently.

Independently of how you call them, make sure to understand when they are server side or not.

Not all brokers offer server side OCO and those who do not offer they will avoid this topic

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  #5 (permalink)
Burlington, ON Canada
 
 
Posts: 18 since Feb 2021
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Thanks for your reply.

Mine offer both.

And I have seen other traders who's platform also offers both and they will sometimes opt for OCO and other times a bracket order and it didn't seem to be clear why they were choosing one over another.

I understand why they would opt for a market order.

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  #6 (permalink)
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the above answers are correct!

to make it clear, you just have to read the full name: Order Cancels Order or One Cancels Other (with other words, as soon one part is filled, the other part of the order will be canceled

You also can use an OCO as break-out order i.e. you can enter a Buy-Stop and a Sell-Stop order 1 tick above and 1 tick below the first 5min candle, if one part is filled, the other part of the order will be canceled

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  #7 (permalink)
Burlington, ON Canada
 
 
Posts: 18 since Feb 2021
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Thank you.

Order Cancels Order is what I found confusing because isn't that what the bracket order does?

I think by stating that was making me question whether "bracket" order didn't already function the same way and whether I was missing something about the bracket order.

That's really smart what you were saying about the buy stop and sell stop.

I have been trading forex and I am new to futures. Would I have needed to open a hedge account with my broker in order to create that type of order with futures also?

To be honest at this stage I am just trying to get comfortable as it is much faster than forex.

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  #8 (permalink)
Austin Texas / US
 
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First all the postings above have good answers.


Trading in Canada View Post

Order Cancels Order is what I found confusing because isn't that what the bracket order does?

" ... isn't that what the bracket order does? "
YES.
As stated in the answers above OCO is a feature than can be applied to different types of orders for different purposes.



Trading in Canada View Post

To be honest at this stage I am just trying to get comfortable as it is much faster than forex.

Would I have needed to open a hedge account with my broker in order to create that type of order with futures also?

I would re-write this question more simply, "Would I need to open a brokerage "futures" account to create that type of order with futures also?

The answer is "Generally yes, but larger brokers like Interactive Brokers, TDAmeritrade, etc might help customers with accounts that can trade a larger offering of instruments."

My better answer is ... There might be a faster, simpler path to get to the final conclusions you seek.

I recommend:
1) Pick a market and instruments you want to trade
2) Google around and ask here for the most popular broker / clearing house (FCM) combinations for that targeted market
3) Look on those brokers websites to see which orders are supported for the desired FCMs.

Move to next steps in your learning, planning and setup process

HedgePlay

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  #9 (permalink)
Burlington, ON Canada
 
 
Posts: 18 since Feb 2021
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Hi Hedgeplay

Thank you for responding. So unfortunately I am limited on what broker I can use because I'm in Canada.

I looked at interactive brokers but due to a number of reasons, primarily lack of support and being new at this I chose not to go with them.

Thank you for the great advice. I will look into what you suggested.

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  #10 (permalink)
Minoqua Wi USA
 
 
Posts: 71 since Sep 2019
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An OCO is a contingency type of order, contingent on the first part of the order to get filled before the second part gets cancelled. The other bracket orders mentioned are not contingent on anything. You can use all kinds of bracket orders to either enter or exit the market. To play breakouts you can bracket market consolidation with buy stop and sell stop or if you want to pick tops and bottoms you can bracket market with limit orders. To exit trades you can bracket with limit and a stop, etc

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  #11 (permalink)
Burlington, ON Canada
 
 
Posts: 18 since Feb 2021
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Hi Mozart2112

So if I understand what you're saying, let's say I do an OCO to buy but I only want my order to trigger when price goes into and then leaves above my buy.

Then my order would only get triggered not when it enters into my initial set up, but only when goes back above it?

Hope that makes sense.

So I would set my condition above my buy price or below?

I'm asking because I saw someone do this today and I couldn't understand why he chose his trigger price below and not above.

It worked but it didn't make sense.


Mozart2112 View Post
An OCO is a contingency type of order, contingent on the first part of the order to get filled before the second part gets cancelled. The other bracket orders mentioned are not contingent on anything. You can use all kinds of bracket orders to either enter or exit the market. To play breakouts you can bracket market consolidation with buy stop and sell stop or if you want to pick tops and bottoms you can bracket market with limit orders. To exit trades you can bracket with limit and a stop, etc


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  #12 (permalink)
Manchester, United Kingdom
 
 
Posts: 9 since Jul 2020
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Trading in Canada View Post
I've been trying to find the difference between an OCO order and a bracket order.

My understanding is OCO is essentially a bracket order.

So when would use a bracket order versus a OCO order?

For a typical trade with a take-profit and a stop-loss, it is described like this:

BRACKET (
....Entry Limit Order
....OCO [
........Take-Profit Limit Order
........Stop-Loss Market Order
....]
)

The bracket means the Take-Profit and Stop do not become active until the entry order is filled.
The OCO means if the Take-Profit is hit, the stop is cancelled, or if the stop is hit the take-profit is cancelled.

It is also possible to combine multiple brackets and OCO orders. For example, if price is trading in a range and you want to enter when the range breaks, but you don't know whether it is going to break bull or bear, you can setup OCO bracket orders for Stop entries both top and bottom, and that will get you in the market whichever side breaks first, and will also manage the appropriate take-profit and stop orders for each side.

OCO [
....BRACKET (
........Bull Stop Entry
........OCO [
............Take-Profit Limit Order Bull side
............Stop-Loss Market Order Bull side
........]
....)
....BRACKET (
........Bear Stop Entry
........OCO [
............Take-Profit Limit Order Bear side
............Stop-Loss Market Order Bear side
........]
....)
]

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  #13 (permalink)
Burlington, ON Canada
 
 
Posts: 18 since Feb 2021
Thanks: 2 given, 7 received

Thank you so much that was so helpful.


shokunin View Post
For a typical trade with a take-profit and a stop-loss, it is described like this:

BRACKET (
....Entry Limit Order
....OCO [
........Take-Profit Limit Order
........Stop-Loss Market Order
....]
)

The bracket means the Take-Profit and Stop do not become active until the entry order is filled.
The OCO means if the Take-Profit is hit, the stop is cancelled, or if the stop is hit the take-profit is cancelled.

It is also possible to combine multiple brackets and OCO orders. For example, if price is trading in a range and you want to enter when the range breaks, but you don't know whether it is going to break bull or bear, you can setup OCO bracket orders for Stop entries both top and bottom, and that will get you in the market whichever side breaks first, and will also manage the appropriate take-profit and stop orders for each side.

OCO [
....BRACKET (
........Bull Stop Entry
........OCO [
............Take-Profit Limit Order Bull side
............Stop-Loss Market Order Bull side
........]
....)
....BRACKET (
........Bear Stop Entry
........OCO [
............Take-Profit Limit Order Bear side
............Stop-Loss Market Order Bear side
........]
....)
]


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