How to Use Stop Loss and Take Profit Simultaneously (OCO - One Cancels the Other)?
You don't have to use Stop Loss and Take Profit at the same time, but if you want to use both, here's how the two orders work:
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Stop Loss and Take Profit will be activated automatically after the purchase order is executed. Exit Strategy can be used in all types of orders for stocks with a minimum purchase of 0.1 shares.
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If the price drops from the purchase price and reaches the Stop Loss price, the Stop Loss order will be executed and Take Profit will be cancelled.
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Conversely, if the price rises from the purchase price and reaches the Take Profit price, the Take Profit order will be executed and the Stop Loss will be cancelled.
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The OCO (One Cancels the Other) feature uses GTC (Good Till Cancel) for a maximum of 30 calendar days.
Example:
User A wants to purchase 1 share of AMZN at a price of $100/share on October 24, 2022 by using the GTC (Good Till Cancel) order. Then user A set the Take Profit price at $120 and Stop Loss at $90.
Here are the possible scenarios that could occur with this order:
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If on November 1, 2022, the AMZN stock price rises to $120. The Take Profit order is automatically executed, and AMZN shares are sold at $120 and the Stop Loss is automatically canceled. User A has successfully made a profit of $20.
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Then, if on November 2, 2022, the AMZN stock price drops and reaches $90. The Stop Loss order is automatically executed, and Take Profit is automatically canceled. AMZN shares are then sold at $90 to limit losses.
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However, if by November 23, 2022, the AMZN stock price never reaches $120 (Take Profit) or $90 (Stop Loss), then at the end of the 30-day period, both orders will be automatically canceled.
To recap, if one of the two orders is executed, the other order will be canceled. The same applies to order cancellations. Canceling one order will cancel the other. For now, Stop Loss and Take Profit orders can only be added above a buy order.
You can add Take Profit or Stop Loss when making a purchase order, and you can add or change Take Profit or Stop Loss on a purchase order that has already been created.