One Cancels the Other (OCO) order is a type of conditional order used in trading to manage risk and automate trading strategies. With an OCO order, two orders are placed simultaneously, but if one of the orders is executed, the other order is automatically canceled.

The OCO order consists of two component orders: the primary order and the secondary order. The primary order is typically a limit order to buy or sell a security at a specific price level, while the secondary order is a stop order to buy or sell the same security at a different price level. The primary order is often set at a profit target, while the secondary order serves as a stop-loss order to limit potential losses.

When either the primary or secondary order is triggered and executed, the other order is instantly canceled, preventing conflicting positions or contradictory trading decisions. This allows traders to set predetermined profit targets and stop-loss levels simultaneously, reducing the need for constant monitoring and manual order adjustments.

OCO orders are particularly useful in volatile markets where prices can fluctuate rapidly. They provide traders with a means to manage risk and protect profits, enhancing trading efficiency and helping to automate trade execution.