After my recent post on market, limit and stop orders, I got an interesting question from a TK client named Jim. (These basic types of orders have unique characteristics and risks. Be sure to read the previous post to understand them more clearly.) This trader takes a given price target and trades around it. For example, if the equity goes up by 10%, he’ll sell some of his position to take some profit. If it goes down by 10%, he’ll often buy more in the hopes of riding an uptrend.
He wanted to place two limit orders at the same time, one buy and one sell, to execute the strategy above. Naturally, these are mutually exclusive trades: If the buy order goes through, he wants to automatically cancel the sell or vice versa.
Jim, I’ve got good news for you: to do this, login and head over to Trading > Stocks + ETFs. Then select One Cancels Other (Stock - Stock) in the Advanced Orders menu. On the next screen, you’ll see two areas to enter the orders. It doesn't matter which order you place on top or on bottom. Once submitted, both orders will be live immediately. However, when one is executed, the other will be cancelled.
There’s one manual adjustment you’ll have to make: you cannot set these orders in percentage increments. You must figure a 10% increase or decrease and use the price of the stock at the parameters you calculate.
OCOs are considered advanced orders, so they have their own set of risks. Read through the Advanced Orders disclosure to learn more.
Once one order is executed, the other will cancel. If you wanted to set up the same parameters again, you would need to submit a new OCO order once you received your first execution on the first OCO order.
Regards,
--Nicole Wachs
Director of Education
All-Star Commentator
Nicole’s previous blog posts: Building on Beginners’ Luck and Stocks versus Bonds
Supporting documentation for any claims made in this post will be supplied upon request. Send a private message to All-Stars using the link below the profile image.
Advanced orders are placed at TradeKing on a Not Held basis. When the conditions are met they are automatically released to the market as open orders. Certain advanced orders may not be eligible for execution when the condition is met (for example: you do not have enough buying power in your account). You solely are responsible for managing your orders to avoid errors, and the costs associated with the resolution. An advanced order can be held indefinitely until you decide to cancel it. Please note that advanced orders are particularly exposed to the risks derived from system malfunction and disruptions. Read a more descriptive disclosure about Advanced Orders.
Any strategies discussed and examples using actual securities and price data are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. In reading content in the Community, you may gain ideas about when, where, and how to invest your money. Although you may discover new ideas or rationale that may be compelling, you must ultimately decide whether or not to put your own money at risk. Consider the following when making an investment decision: your financial and tax situation, your risk profile, and transaction costs.