Earlier I explained the variations of exiting a trade once you are already in a
trade. The two ways to exit is to Stop for loss or Limit for profit. If you have
a trade already engaged (say you manually entered at current market price)
and if you want to have both a Stop for loss and a Limit for profit placed on
that trade then you would use an “OCO”.
OCO places the two entry orders (that would cancel the existing trade, either
for profit or for loss) and once one of those two orders gets triggered then the
other one just disappears (since it is no longer needed). This is why this form
of order is called “OCO” because one of the orders will cancel the other (One
Cancels the Other).
If, for example (this is one of the four variations explained earlier), you are
active in a trade going long (up) then you will set the OCO to have two orders;
one as a Sell-Limit (above current market price – this is your Limit for profit),
and the other as a Sell-Stop (below current market price – this is your Stop for
loss).
Here is what an order box looks like for this type of order:
Forex Sailing
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IF-DONE OCO
This order type combines the “IF-DONE” and the “OCO” into one. Basically
this is used if you want to place an Entry order (accomplished in the “IF” part)
that has both a Stop set for loss and a Limit set for profit (accomplished in the
“DONE – OCO” part). Just apply all the rules I’ve explained earlier for each
part.
Here is what an order box looks like for this type of order:
Forex Sailing
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TRAILING STOP
One thing that I love about FXCM is that they have (relatively recently) added
the ability to trail stops automatically against the trade you have entered. This
is a wonderful feature that is very useful for a few types of
strategies. Unfortunately not all brokers have automatic trailing stops, and
those that do have different ways that they are implemented.
ACM, the broker whose platform I am showing you here does have an
automatic trailing stop, except that it is a separate order, thus you can’t tie it in
with an Entry order (IF DONE OCO). Oh well, here is what it is and how it
works (with them).
You simply set a Stop order (as you’ve learned earlier) except here you have
an additional option to set how many pips behind the market it is to trail. If
for example you were to set a trailing stop behind your long trade (going up)
for say 30 pips, then as the market moves up your stop will automatically
readjust itself to remain that far away, so if the market eventually reverses you
would get stopped out about 30 pips away from where the market peaked.
Here is what an order box looks like for this type of order:
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