The conditional order is where you place certain criteria that have to be met within your trade. This is a kind of order that must be posted prior to actually making a trade. There are two types of conditional orders that you can use. These have different rules for getting an order posted and filled.
One Cancels the Other (OCO)
The first type of conditional order is the OCO or One Cancels the Other order. This lets you place many orders at a time. When one order is filled, all the other orders are canceled. This order might involve several movements that take place in a day. You might use this when a stock is shaky and is going in various directions. Here is a look at how an OCO order works:
- Stop and limit orders may be posted on a particular stock. The limit order is your profit target while the stop order keeps you from losing too much money if the stock does not move in the way you expect it to.
- One of the two orders should be reached at some point. For instance, you might buy a stock at $30 and then it reaches the $35 limit order before it could get to the $25 stop order.
- A new order is posted by the OCO to close the other order that was not reached. While the limit order is utilized, the stop order is canceled out. This is a perfect option to use if you have an order that might go out with a breakout or fade.
You also have the option to use an OCO on more than one stock at a time. You might have two separate orders for different stocks, but you will have the second of those two orders canceled when the first is met. This is useful if you see trends with two separate stocks that are similar to each other but you want to leverage your position and get close enough with both of them.
Order Sends Order (OSO)
The second conditional order is the Order Sends Order or OSO option. This adds more orders into the market when conditions from an earlier order are reached. Here is an example of how this kind of trade works:
- You can place a buy order at $150 for a stock that is currently at $140.
- An OSO will be added to that original buy order. You could place a sell order to sell that stock when it reaches $180.
- A separate sell order may also be placed for when the stock reaches $140 again. You can place as many of these additional orders onto your OSO as you wish. The key is to be specific about where they will work and what it might take for such a trade to move forward.
- When the OSO meets one of the sell orders, the other is canceled. This means that when the stock gets to $180, the one for $140 is removed altogether. This is an intriguing solution for managing a trade that ensures you have trades moving. You will not only enter into a position at the right time based on the order but also get into a deal based on what is available at a given time. Unlike the OCO, the OSO is designed with just one stock in mind.
