Spread Betting Orders: One Cancels The Other

Beyond the basics of limits and losses, there are a handful of additional, slightly more complex but nevertheless useful orders that can be applied to different trading situations. Market movements can only be forecast, and the reality of the situation is that even institutional investors and academics cannot call with any degree of certainty the behaviour of the markets when all the variables are factored in. This places a premium on dynamism and the ability to respond effectively to changing market conditions, with relies on strategic planning and putting contingency measures in place to deal with potential market movements ahead of time. While responsive trading throughout the day requires constant attention and monitoring of market developments, there are alternative measures that can be put in place to help shape trading portfolios come what may, without the need to be chained to the trading desk 24/7.

One of the ways in which this sort of contingency planning can be put in place is through the effective use of one cancels the other orders (OCO), which enable traders to take multiple conditional decisions ahead of time. By implementing OCO orders, traders can decide that in certain market conditions, one particular order should prevail and cancel another future order, to provide more responsive, automated trading that turns on the basis of market outcomes and gives more control to the trader in ensuring the right positions prevail in any market condition.

How One Cancels The Other Works

The unpredictability of the markets makes it important for traders to attempt to cover all the bases, and this is particularly the case for traders with a cautious risk appetite – whether as a result of a cautious investment strategy or a need to preserve trading capital at all costs. This is where OCO orders come in, as a means of enabling traders to factor in decisions for different trading outcomes, so that their trading will is still executed automatically regardless of the market outcome.

One cancels the other orders work by establishing a link between two separate orders that are already in place, such that they are each conditional on the satisfaction of the other order. If one order is fulfilled, it cancels the other order and executes the trade accordingly. This means that traders can specify their preferences, taking into account that markets might rise or fall and that the trading situation may well deviate from their research and rationale. And as a free order in its own right, one cancels the other orders can be implemented cost effectively to provide a greater degree of certainty over the response to either a rising or falling market.

When To Use One Cancels The Other

One cancels the other orders can be used in a number of ways to establish conditional trading decisions that are designed to automatically override corresponding and often contradictory orders. In practice, this means that traders can take measures to ensure that if one order isn’t realised or doesn’t crystallise according to the changing market environment, an alternative order which is more suited to the eventual outcome can take hold, cancel the first order and execute the will of the trader. Effectively, this means that traders can stipulate two separate orders at different times, in order to instruct their trading in consideration of potentially different outcomes.

One of the most common situations in which OCO orders are implemented is in conjunction with a pairing of a guaranteed stop loss order and a guaranteed stop limit. This has the role of effectively narrowing the scope of the trading cycle, such that if the markets perform well a profit can be banked automatically at a defined level, or if they perform badly losses can be capped at a predetermined rate. While this does have the effect of taming the markets slightly in the sense that profits and losses are enclosed, it can deliver significant advantages to traders who are looking to take advantage of the benefits of spread betting without being prepared to absorb the full degree of risk spread betting naturally brings.