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Let’s continue from where we stopped at the different types of forex orders
ONE-CANCELS-THE-OTHER (OCO) ORDERS
A one-cancels-the-other (OCO) order is a type of trade order that combines two separate orders, typically a stop order and a limit order, into one. The order is designed so that if one part of the order is executed, the other part is automatically canceled.
For example, a trader might place an OCO order to buy a stock at a limit price of $50, with a stop price of $45. If the stock price rises to $50, the limit order will be filled and the trader will enter a long position in the stock at $50. However, if the stock price falls to $45, the stop order will be triggered and the trader will sell their position in the stock at $45. In this way, the trader has set a profit target (the limit order) as well as a stop-loss point (the stop order) in one trade.
OCO order is a useful tool for risk management and profit taking, it allows the trader to enter into a trade with a clear plan of how much they are willing to gain or how much they are willing to lose. It also allows the trader to set a profit target and stop-loss point simultaneously without having to monitor the trade constantly.
TRAILING STOP ORDERS
A trailing stop order is a type of stop order that is used to protect profits on a long position or limit losses on a short position. Unlike a traditional stop order, which is placed at a specific price, a trailing stop order is placed at a certain percentage or dollar amount away from the market price.
For example, a trader might place a trailing stop order for a stock at a distance of 5%. If the stock is currently trading at $100, the trailing stop order will be placed at $95. If the stock price rises to $110, the trailing stop order will automatically adjust to $104.50 (5% below the current market price of $110). If the stock price falls back to $95 or below, the trailing stop order will be triggered and the stock will be sold.
A trailing stop order allows the trader to lock in profits as the price moves in their favor while also providing a level of protection in case the price starts to move against them. This type of order is often used by traders who have a longer-term view and are willing to hold a position as long as the price is trending in their favor.