Placing an order to trigger at a certain price away from the current market could be the most convenient way to trade any assets. It can help you to enforce discipline in your trading and also save you from watching the volatile market trends continuously. While this could be a convenient option with using simple orders to trade, there are advanced orders available which can be used for planning ahead your trades. And, knowing what risk management tools to implement, or when, is the key essence of managing your crypto trading portfolio.
The most popular crypto trading platforms like Binance offer both basic and advanced order types to the traders. Let's have a look at the most popular one:
Do you really wish to use the best risk management tool which could help you manage your exit strategies? If yes, then you should go ahead with the most advanced order known as OCO (One-Cancels-the-Other). This type combines two market orders where if one is fully or partially filled, the other one will be canceled automatically.
If the market goes perfectly well and hits $120 then, the Take Profit option will be executed. But at the same time, the Stop Loss will be cancelled automatically. Imagine if the market doesn't go well, and the price hits $80, then a stop loss will be executed and at the same time take profit will be cancelled out.
This was a basic example of an OCO. Let's understand this type in deep. Why does this type matter?
In any kind of trading, the traders always seek to capitalize on the market and rear profits. And, this is the reason why they implement multiple strategies in order to make sure that the risks are mitigated. When it comes to placing an OCO, the trader can take quick action on any trade while taking advantage of the increased price movements.
Let's understand how?
In this type, you have the ability of placing two orders simultaneously which increases the probability of profits. If one of the orders is not intended, the other one will be canceled instead of being placed in a short position.
Explanation: OCO Order
The pair of orders placed in the OCO order type is linked together with a kind of order management and this management ensures that only one of the two orders is executed. This is the best risk management tool ensuring that traders minimize negative exposure to the market, while enhancing their profitability potential simultaneously.
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