An OCO order cancellation refers to a pair of two linked orders, typically limit orders: as soon as one is filled, the other is automatically cancelled, with no manual action from the trader. This is the definition used by the US derivatives regulator, the CFTC, in its official glossary, consulted on October 20, 2026.
This mechanism looks simple on paper, but it hides a question many beginner traders get wrong: what does this cancellation actually guarantee, and what does it not guarantee? Understanding what the sources really say about the OCO order, without extrapolating beyond them, avoids costly misunderstandings.
What the CFTC’s official definition says
The CFTC describes the OCO this way in its educational glossary: “One Cancels the Other (OCO) Order: A pair of orders, typically limit orders, whereby if one order is filled, the other order will automatically be cancelled.” In other words, a pair of orders, typically limit orders, where the fill of one triggers the automatic cancellation of the other.
This definition covers regulated futures and options markets in the United States. It does not mention stocks, ETFs, or the spot foreign exchange market. To understand how the OCO works concretely on a brokerage account, it is necessary to turn to broker documentation.
The typical documented use: combining a stop and a limit
A regulated broker, Fidelity, describes the mechanism this way: “With a one-cancels-the-other order (OCO), 2 orders are live so that if either executes, the other is automatically triggered to cancel.” Two orders are therefore active simultaneously, and the execution of one triggers the cancellation of the other. This combination is typically used to place both a protective stop and a take-profit limit on an already open position, without having to watch the market continuously.
A second regulated broker, Charles Schwab, confirms the general mechanism: “A one-cancels-other (OCO) order is a conditional order in which two orders are placed and one order is canceled if the other order is filled.” Two orders are placed, and the execution of one triggers the cancellation of the other. All three sources agree on this principle: the execution of one triggers the cancellation of the other.
An often overlooked constraint: matching time in force
Fidelity’s documentation specifies a technical rule that is little known to beginners: “Time-in-force: Must be the same for both orders.” Both legs of an OCO order must share the same time in force. It is therefore not possible to combine, for instance, a day-only order with a good-till-cancelled order within the same OCO pair. This constraint structures the pair before it is even sent to the market.
Why this article does not generalize to every market
The sources used here cover precisely two areas: the CFTC glossary documents the OCO on regulated futures and options markets in the United States, while the Fidelity and Schwab pages document the OCO on stocks and ETFs. Neither one specifically documents the execution of an OCO order on the spot foreign exchange market (forex), which operates under liquidity and execution rules specific to each broker. Claiming that the OCO mechanism behaves identically on forex would be an unsourced extrapolation: this text sticks to what the primary sources actually document.
What automatic cancellation does not guarantee
- It does not guarantee the execution price of the filled order, which depends on the order type chosen within the pair, see the distinction between market order and limit order.
- It does not guarantee that the protective stop included in the pair triggers exactly at the set level, a point detailed in the article on the stop-limit order.
- It documents nothing about the spot foreign exchange market, for lack of a primary source specifically covering that area.
- It describes nothing beyond the cancellation of the second leg once the first is filled: none of the three sources used take a position on a delay or technical interval between the two events.
Frequently asked questions about the OCO order
What is an OCO order in trading?
An OCO order (one cancels the other) is a pair of two linked orders, typically limit orders. According to the CFTC, as soon as one of the two is filled, the other is automatically cancelled, with no manual action from the trader.
What is an OCO order actually used for?
It is typically used to combine a protective stop order and a take-profit limit order on an already open position, as documented by Fidelity and Schwab. The trader thus sets both exit scenarios in advance, without having to monitor the market continuously.
Must the two orders in an OCO pair have the same conditions?
Not all conditions, but at least the time in force, which must be identical for both orders according to Fidelity’s documentation. The price levels, on the other hand, naturally differ between the stop and the limit.
Does the OCO order work the same way on forex as on stocks?
The sources used here, the CFTC and two regulated brokers, document the OCO on futures, options, stocks and ETFs, but none specifically documents how it functions on the spot foreign exchange market. It is therefore best to avoid generalizing without checking the documentation specific to each forex broker.