In Zerodha, OCO (One Cancels Other) refers to a specific type of order within its Good Till Triggered (GTT) feature, designed to help traders manage their positions by automatically placing both a target (profit-booking) order and a stop-loss (loss-limiting) order. The key characteristic of an OCO order is that if one of the conditions (either target or stop-loss) is met and the order executes, the other pending order is automatically cancelled.
Understanding OCO (One Cancels Other) Orders
An OCO order is a versatile tool used in financial trading to automate risk management and profit booking. It combines two contingent orders: typically a limit order (for profit booking) and a stop-loss order (for loss protection). The moment one of these orders is filled, the other is immediately cancelled by the system, preventing unintended exposure to the market. This mechanism ensures that you either book your desired profit or limit your potential loss, but not both.
OCO in Zerodha's GTT Feature
Zerodha integrates the OCO functionality into its Good Till Triggered (GTT) orders, making it particularly useful for investors and traders who cannot constantly monitor the market. A GTT OCO order allows you to set long-standing conditions for both exiting a position at a profit or cutting losses, without requiring daily order placement.
Here's how it generally works with Zerodha's GTT OCO:
- Target Price: This is the price at which you wish to book profits. When the market price reaches your set trigger price for the target, a limit sell order is placed.
- Stop-Loss Price: This is the price at which you want to limit your losses. When the market price falls to your stop-loss trigger price, a sell order is placed to exit the position.
- One Cancels Other: The core of OCO is that as soon as either your target price or stop-loss price condition is met and the corresponding order executes, the other pending order is automatically cancelled.
For instance, when placing a Sell GTT – OCO order in Zerodha, you would define both a target price and a stop-loss price. If your stop-loss condition is met—for example, if a stop loss order is placed to sell at ₹1730 with a trigger price of ₹1730—a sell order (like a CNC order for delivery trades) is automatically placed. Crucially, the system simultaneously cancels the other pending target condition. Conversely, if your target price condition is met, the stop-loss order gets cancelled. This ensures that you either secure your profit or limit your loss, but never both from the same position using this order type.
Benefits of Using OCO Orders
Using OCO orders through Zerodha's GTT feature offers several advantages for traders and investors:
- Automated Risk Management: It helps in defining your maximum acceptable loss and desired profit levels beforehand, automating your exit strategy.
- Convenience: You don't need to monitor the market constantly. The orders remain active until triggered or cancelled manually, or for up to one year in the case of GTT orders.
- Discipline: It enforces trading discipline by ensuring you stick to your predefined entry and exit strategies, preventing emotional decisions.
- Peace of Mind: Knowing that your trades are protected by automated stop-loss and profit-booking orders can reduce stress.
How to Use OCO with GTT on Zerodha
To place an OCO order using Zerodha's GTT feature, you typically follow these steps:
- Log in to your Zerodha Kite platform.
- Select the stock or contract you wish to trade.
- Choose the "GTT" option (often found under the order window).
- Select the "OCO" order type.
- Define your trigger price, limit price, target price, and stop-loss price.
- Place the order.
For more detailed instructions on using the GTT feature, you can refer to Zerodha's official support documentation on Kite features.
| Component | Description |
|---|---|
| GTT OCO | Combines two contingent orders: a target order and a stop-loss order. |
| Target Order | Aims to sell at a higher price to book profits. |
| Stop-Loss Order | Aims to sell at a lower price to limit potential losses. |
| Functionality | If one order's conditions are met and it executes, the other is cancelled. |
