One-cancels-the-other Order (OCO) is a powerful trading tool that consists of two separate orders that, when one is fulfilled, cancels the other. It is designed to protect traders from the risk of unfilled orders due to stock prices changing quickly. OCO orders are especially helpful for traders operating in a volatile market since it ensures that one order is filled even if the stock price has moved too much for the other order to be triggered.

Traders generally opt for OCO orders when trading volatile stocks that can swing over a wide price range. It is beneficial because it ensures that, no matter how much the price moves, at least one of the orders is guaranteed to be fulfilled.

When setting up a OCO order, the trader will set a ‘stop’ order and a ‘limit’ order. A ‘stop’ order is an order set at a specific price or below, with the intent of buying or selling the stock if it reaches that price. A ‘limit’ order is an order set at a specific price or above, with the intent of buying or selling the stock if it reaches that price.

Once either of these orders are triggered, the other gets cancelled automatically. Traders can also set up additional conditional orders, such as a ‘fill or kill’ command to ensure the order is actioned at the desired price, or a ‘good till canceled’ command to ensure the order stays active until it is fulfilled or cancelled.

In summary, OCO orders are especially useful for traders in volatile markets, as it allows them to have their orders fulfilled regardless of the stock price. The OCO order consists of two separate orders, with one order canceling the other when one is filled. A trader can also set additional conditions on their orders, such as a ‘fill or kill’ or ‘good till canceled’, to ensure the order is fulfilled at their desired price.