We're pretty excited about launching our latest advanced order feature, One Cancels Other (OCO). This bad boy -- along with One Triggers Other, contingent orders and trailing stops -- takes our clients one step closer to programmed trading, a force pretty much exclusive to institutional investors currently. (That's the reason for my image-choice today: a bunch of felt robots to symbolize the power of automation!) One Cancels Other works just as the name suggests: you can place an order with two parts, and if one part is triggered by market conditions, the other order cancels automatically. This comes in handy especially for bracketing an existing position and better controlling your risk. Say, for example, you bought stock or option XYZ at 4, and you've seen a nice rise in price to 7. Problem is, you're heading off for vacation. If your price target was 8, you'd be more than happy to sell and lock in the profit -- but similarly, if the position takes a dive you want to limit your losses. An OCO order takes care of both possibilities: you can place a limit order to sell at 8 AND a stop-limit order to sell at, say, 3. Whichever order triggers first will go to market, while the other order is automatically canceled -- and you can stop worrying over vacation. One Triggers Other works pretty similarly: if conditions change so that one order gets sent to market, that action triggers another pre-loaded order. OCO and OTO orders can be established for stock-option or stock-stock combinations.
Trailing stops can really help fine-tune your risk management. You can set a "trail" amount in either points or a percentage. Take the above example again, where the stock or option is at 7. You could use trailing stops to set a 1-point "trail", so that as the position goes up, you'd have a stop order 1 point below the current market price. So if the position takes a sudden turn for the worse, your stop would get triggered and help protect your downside risk -- all while not limiting your chances to participate in further upside movement.
Contingent orders allow you to set a condition under which a stock or option order goes to market. These advanced orders are pretty useful when you think there's a strong relationship between two companies -- a distributor and manufacturer, for example, or an oil supplier and a big oil consumer. If stock or option A hits a certain price target, your contingent order stands ready to react with an order on stock or option B. Again, it's all about freeing you from obsessively watching the computer, so you can time your responses more intelligently and efficiently.
You can check these out in greater detail by logging in to your TK brokerage account, then clicking on Trading in the top nav bar. You'll see a pulldown menu of advanced orders towards the bottom of that screen, plus some pop-up help to explain what eac order means. (See samples below.)
I'd love to hear what you think of these new order types -- and which you may be interested in next. Talk to me, people!
[image: 3 robots by agustina on flickr]
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