OCO & OSO Orders for Part-Time Traders | Podcast Episode #357

0:07
Hey, I’m Ryan Mallory and this is my Swing Trading the Stock Market podcast. I’m here to teach you how to trade in a complex, ever changing world of finance. Learn what it means to trade profitably and consistently, managing risk, avoiding the pitfalls of trading, and most importantly, to let those winners run wild.

0:25
You can succeed at the stock market and I’m ready to show you how. Hey everybody, this is Ryan Mallory with Swing Trading the Stock Market. And today’s episode, we’re going to be talking about order cancels orders. We’re going to talk about order sending orders. We’re going to talk about conditional orders in general and how do they work, how do they work specifically for a parttime trader that can’t be in front of the computer all the time?

0:49
Today’s e-mail comes from a guy, he’s from Quebec, he lives in Tasmania, Australia, and he asked for a good Canadian Redneckname. The only one that I could really come up with was Claude. He came from Quebec, Claude Lemieux, he was NHL hockey player, one of the good ones. So in this episode Claude writes, Dear Ryan, thank you for all the work that you do with the podcast.

1:09
I’m a big fan. I won’t say I stumbled upon it. Instead I discovered it looking for high quality and realistic trading education. Great content. Now I apologize if you have covered some of these topics before, but I thought I would ask specific questions with topics that you discussed on various episodes. Some background, I live in Tasmania, Australia and work full time.

1:28
I have been pursuing trading for 1 1/2 years, mostly learning and developing my strategy, style and process for trading. I’ve mostly paper traded, but I am now ready to start trading live and regularly. My intention is to trade part time as a swing trader and to use two to three hours that I have at night during the week to trade. The bulk of my preparation occurs on Sunday, especially as the market opens at 11:30 PM my time during the week, which means I am usually not awake when I open positions whilst the market is open because of my full time job.

1:57
Instead using trade station I use OSO and or OCO orders to open, close and manage positions. Overall my orders are always planned and always include a stop loss at a strategically determined area. Good stuff so far, I really like where this guy’s heading with it. Questions number one, do you have any recommendations about using OCO and OSO orders for properly managing risk, and are is there something that I may be underestimating?

2:21
For example, I currently submit my OSO orders with entries Profit Targets and Stop Losses where I attach a condition to my entries so that they are triggered after the 10 AM exchange time. I also attach a time condition to my exits where if it’s my initial stop loss, it gets triggered anytime after 9:45 AM in order to avoid the first few minutes for my profit targets.

2:41
I also attach a time condition and a price condition where if price falls below a key moving average and it’s after 3:45 PM, my order gets closed. Question #2 along the same lines as the first question, are there any times of the day that I should specifically focus on for better trade X? My main concern as a part time trader who cannot be up for the market hours is that I do not rely on OSOOCO orders without properly understanding some of the nuances about how my trades will be executed or that my trades will not be executed at all.

3:10
Sorry for the long e-mail and thanks again for all the work you do. Looking forward to hearing from you. He has some French Canadian from Quebec, so feel free to give me a Quebec Redneck name. Best regards, Claude. All right, Claude, Good question here. Let’s tackle these questions one by one.

3:29
First off, he lives in Tasmania, Australia. The markets open at 11:30 PM For him, that is absolutely crazy. That means that he’s 14 hours ahead of the East Coast. That’s that’s incredible, honestly. So for those who don’t know, order sends order. Oso what does that do? That means when you have an order, it triggers, it’s gonna send another order.

3:48
So if that first order doesn’t trigger, then the 2nd order is not going to trigger either. So in this case, what he does and what a lot of people do, especially what I’ve done in the past when I’ve used Oso orders, is that it’ll have a condition on it. The 1st order cannot even be sent to be executed until after 10:00 AM. So after 10:00 AM, if that first order gets executed, then it immediately sends another order.

4:09
That’s usually my stop loss, but you can also have it where it sends multiple orders out as well to where you can have it send out a stop loss plus maybe your first profit target, your second target and your third target or just your you know. If you’re a person who doesn’t take partial profits, you can have it to where it just sends a stop loss and a target price that it closes out the entire trade in the case of order cancels orders OC O’s.

4:32
Let’s say that you put an order in for a trade, but you have like 3 or 4 stocks that you’re watching to see if it gets executed. You’re not sure which one will get executed if any of them were to get executed. Maybe all of them will be executed. But what you know is that you only want to add 1 position or two positions.

4:50
For this case, let’s say one position. All you’re looking at is one position, so you put an order in for all of them. If one of them gets triggered, you can actually have it to where it cancels the other three. You don’t want to be able to execute the other three. You only wanted to add one additional position on the day and that’s how order cancels orders can work.

5:06
You can also have it to where if your stop loss gets triggered, you want to go ahead and get rid of your target order. So order cancels. Orders are really good. You can put a lot of conditions on them. You can put a lot of different variables to where like what he was saying in this one here in Trade Station actually is really good for those kinds of things.

5:23
Trade Station works phenomenal when it comes to order cancels orders. I used them a long time ago when I would do some Futures Trading. I had never had any beef with them. I thought it was pretty good. There’s a lot of customizing that you can do with trade station, but you can also do conditional orders on pretty much any any trading platform there as I know, like Think or Swim for instance.

5:41
I’ve done them before and Think or Swim have not had any problems with it. And in Claude’s case, Oso’s and Oco’s and and conditional orders in general, there’s some of the best mechanisms for trading in his situation. Is it perfect? No, nothing’s going to be perfect. There’s always the outlier or the freak chance that something bad could happen.

5:58
But when you’re only able to see like the first two or three hours of trading, yeah, there’s a good chance your orders are not going to get triggered at that particular time. So you have to use conditional orders. You don’t really have any other options and often times too, people will use alert systems to trigger those orders that get sent out.

6:16
So when they put a price alert for a stock, if that price alert gets triggered then it sends a no Co order or it sends an OSO order depending on what you’re hoping to achieve. Now one of the things that you might find interesting that he does with his orders, he waits after 10:00 AM before he sends any of his OSO orders.

6:31
Why does he do that? Well, I talk a lot about on this podcast and on the YouTube channel with a lot of my other videos, particularly the educational ones, that you don’t want to be putting in orders before 10 AM Now, is that a rule for everybody? Does everybody have to apply to that?

6:47
Are you bad if you trade before 10:00 AM? No, I’m not trying to say that at all. I’m just saying for me personally, I think there’s too much volatility in that first 30 minutes of trading to be able to rely on the price action off the times. What you see at 9:30 when the market first opens, or in this guy’s case, and Tasmania, Australia at 11:30 PM, is going to be a lot different than what you see at 9:45 AM or 11:45 PM because you’ll often times get sharp, sharp reversals, both higher and lower.

7:15
And then even after 9:45 AM, by the time 10:00 AM rolls around, it’s going right back up again and reversing what you just saw on 9:45. There’s a lot of sharp reversals in that first 30 minutes of trading. There’s a lot of orders being flooded. That’s also why you see the volume so high in the 1st 30 minutes of trading is because there’s a lot of emotion, a lot of people who have been studying the charts the night before.

7:34
It’s like I got to get into this one at the open. It’s going to explode. Or they start reading things about AMC on the message boards or GameStop or Tesla or Neo or some solar company FSLR. And they’re like, I gotta get into this thing. And they do, They put their market orders in and the market’s just processing all these things all at once.

7:51
And then when you get past the like 11 AM, things start to calm down a lot. People are going to lunch, people are talking to somebody on the phone, people are getting caught up in meetings. There’s not as much activity. And then when you get into that final hour of trading, everybody’s like crap. Now the market’s about to close in the next hour, I got to go ahead and put my orders in.

8:10
They’ll put market orders for on the close. They’ll go ahead and wait till the very last second to get out. So you then you start seeing the volume flood in the last few minutes of trading too, as the market’s trying to process everybody’s orders. So for me, those are some of the most unreliable times in the market and times that I really want to avoid.

8:25
And one of the things that would encourage you not to avoid is swingtradingthestockmarket.com. That’s the patron website that goes along with this podcast. So check it out. You’re gonna get all my stock market information each and every day. You’re going to be getting my bullish and bearish weekly watch lists. You’re also going to get my daily watch lists.

8:42
You’re also going to be getting videos of different stocks that I find intriguing and worth possibly buying or shorting. Plus, on top of that, you’re also going to be getting updates on all the big tech stocks. You’re also going to be getting updates on SPY and the queues and on the Russell 2000. Really good stuff. I’d encourage you to check it out swingtradingthestockmarket.com.

8:59
Now. I’m not going to get sidetracked with that little promo there that I just stuck in there. I’m going to keep talking about Claude’s questions here. Now one of the things that I would say, we talked about the volatility and how undependable the 1st 30 minutes of trading is. The last hour of trading is. So I wait until after 10:00 AM to make my trades.

9:15
Now, I am not so dogmatic about the final hour of trading. I’ll make trades usually up until about 3:30. I’ll even make a trade up until like 3:45 if it’s a really good trade set up. But most of the time I try to avoid that, like at least that last 30 minutes of trading. For sure I’m not making a trade after 10:00 AM Eastern Time or in Tasmania.

9:33
If I was traveling there, I would be waiting until after midnight to make those trades. Now, one of the other things that I found pretty intriguing about what he does here with his trades as he waits until after 3:45 to determine whether or not to close. Now he’s very intricate with these OCO&OSO orders.

9:48
It takes a lot of work to put all these, and you got to really plan it out. You got to make sure that you’re putting them in right, that there isn’t some kind of crazy conflict that can get yourself in trouble. But in that final 15 minutes, he has his brokerage platform determined for him whether or not Price is trading below a certain moving average.

10:04
Again, I don’t know what the moving average is. It’s not relevant to this particular podcast episode that I’m doing, but one of the things that I would be cognizant of is that as swing traders, I think the most important time frame is the daily. That doesn’t mean that people can’t swing trade off the hourly or two hour or even 30 minutes. I just think that in general the daily is the most important one.

10:22
So I would want to be very cognizant of what’s going on with the daily moving averages. Like for instance, if the rule pertains to the 20 day moving average, then I would want it to be sure that I’m going to have a close below the the 20 day moving average. Now stocks can pop in that last 5-10 minutes of trading.

10:38
So there’s a possibility that if you have a conditional order and that says OK, if the stocks looks like it’s going to trade or close below the 20 day moving average in the last 15 minutes and it crosses below it and it sells it in the last 15 minutes, well you could still see a hard reversal that takes it right back above that keep moving average.

10:54
And that would be unfortunate because then all of a sudden you’re stopped out of a trade that didn’t actually close below that moving average. And that happens a lot. So you want to be cognizant of the fact that just because it’s trading below a moving average energy day after 3:45 PM doesn’t mean that by the time 4:00 PM Eastern Time rolls around that it’s still going to be trading below that moving average.

11:14
So I would think that maybe in my case, if I was doing it like that, I would probably be waiting till like after 3:57 and give myself like 3 minutes. If it looks like after 3:57 that the price is dropping below the 20 day moving average and is down below it by a good bit, let’s say like 2/10 of a percent or 3/10 of a percent or something like that to where it’s not just like a penny and let’s say it’s like $100 per share, we’re talking like 30 cents below the moving average, then okay, that’s like 3/10 of a percent.

11:40
Then you have a good idea that it it’s probably going to close below that moving average, also setting price targets. One of the things that I have found over the course of my trading career that makes the biggest difference in my performance is when I set a price target for a stock and the stock runs up to that price target and then it blows right past it.

11:57
When you get those kinds of moves, those can be some of the best moments for your portfolio over the course of a given year. When a stock runs way past the price target, and that’s a good thing, that’s not bad. It doesn’t mean that you don’t know what you’re doing. You don’t know how to set a price target. That’s a good. I hope every one of my trades, the stock goes way past my price target.

12:13
I would love that to happen with every one of my trades. Yes, I love it when it my price target is hit and I can go ahead and book gains at that level, but if it can break through it, man, that is really good. Usually I always take some profits at a price target, but what I really want to see, especially when I get down to that last third, I wanted to see prices take off, leave my price target in the dust.

12:32
And I think you have to figure out a way with conditional orders to where you’re giving yourself a chance with that last ride or die position. After you’ve taken 2/3 or 75% of your trade off the table, you want to let that thing run for a little while. And if you can let it run and it can go up another like 15 or 20%, that’s a great thing that makes a huge difference in the portfolio.

12:53
One of the things that would probably do is I’d probably have it set. Yes, I’m going to definitely have conditional orders for the stop losses, but I may not have a conditional order. If it reaches the price target, yes, I’ll have it for the stop loss. But if it goes up to the price target, I’m not going to have a conditional order that closes me out of the entire trade, probably a portion of that.

13:12
And I may even have, before I even get to the price target, a partial profit taking at, you know, halfway there or 2/3 of the way there. For instance, let’s say I buy into a stock at 100 and I have a conditional ordered that you know after it gets in there for order at $95 and I have a price target at 1:15.

13:30
Well, I may take the 1st, 3rd at 1:05, another third at the price target, and then when I start reevaluating the stock the next day, I want to see okay, where did it close at, where does it look like it can go up to? And then I want to start readjusting my price target from there with a conditional order.

13:45
Maybe I take a half of that final third at 115 or 120, or if it comes back down and breaks below one of those moving averages like what Claude talks about here, maybe I go ahead and close out the whole position. Now you wait till after 9:45 PM to put a stop loss in and I get why.

14:05
Like I was already talking about. The 1st 15 minutes is very very volatile. I usually wait a few minutes before I put my stop losses in each morning. I’m not in necessarily a rush to put them in right at the opening bell. I go ahead and start putting them in one by one at the opening bell.

14:20
Usually it takes me a couple minutes to get them in. I definitely don’t do the good to cancel orders. I don’t fault people who do. I just think there’s a greater risk of being stopped out in that first minute of trading, sometimes even the first split second of trading and you don’t even see where the the bid and ask drop below your stop loss.

14:35
But oftentimes bid and ask drop below your stop loss. You’re out of a trade. Even if it doesn’t even print below that order, the stop loss is going to send a market order. And I’ve had it happen to me before. I hate it. That’s why I don’t do it. That’s why I don’t do the good to cancel orders. So the downside of waiting till 9:45 PM, here’s where a person get himself in trouble is that it continues to fall very hard, very fast.

14:55
Let’s say the stock has some really bad news that comes out. Old Claude here, he’s got his orders in. His conditional orders are waiting until 9:45. By the time 9:45 rolls around, it may be down another 10% below the stop loss. Very possible. I’ve seen it happen before. So there is some risk there.

15:11
I think Claude has to decide for himself whether that risk is something that he’s willing to stomach because it’s really not a definable risk. It could be 10%. It might only be a couple percent. It may actually be trading back above the stop loss after 9:45 PM. So there’s that variable there, a very hard to define variable.

15:28
Another thing that some people do, some people wait after the 1st 15 minutes or the 1st 30 minutes if it looks like their stop loss is going to get triggered to see how the price responds after it hits that stop loss. And then they put a stop loss below the lows of the day after the 1st 15 or 30 minutes of trading, depending on one’s preference.

15:43
So let’s say for instance you get into a stock at 100, you have a stop loss at $95 and you wake up one day and it’s trading at $94.00. Obviously that’s below your original stop loss. What I’ve seen a lot of traders do is they’ll wait for the 1st 15 minutes of trading or so.

16:00
Perhaps it goes all the way down to $92.00 and then it bounces back up to $94.00, still below the original stop loss. But what people will do is they’ll put their stop loss below the $92.00 mark now. So now they’re taking on more risk than what they originally intended to take on, but it’s still being defined, it’s just being adjusted to the downside.

16:18
I kind of hate having to readjust the stop loss to the downside. That gives me a little bit of anxiety because I feel like it’s a slippery slope of bad decision making. Yes, I’ve seen a lot of times where it’ll shoot downward in that first 30 minutes, stop me out, and it’ll go right back up into positive territory, and that’s frustrating.

16:35
But I also recognize too that that’s part of the territory of trading, that there’s going to be those frustrating moments. Why do you think most people quit in trading is because they get frustrated or they make really bad decisions and blow out their capital? I would personally rather be frustrated as a trader than to blow out my account.

16:52
And that’s what a lot of people do. They get frustrated, they make adjustments to their trades, and then they ultimately end up blowing up their account if they haven’t left first because they got so frustrated. So frustration and account blow ups tend to go hand in hand. But the key to all of this, there’s different variations.

17:10
There’s different approaches to using stop losses and conditional orders. One of the things that I would say is find the method that works well for your risk profile. For me, I’m not going to wait till after the first 30 minutes of trading to put my stop loss in or in the case of Claude here, wait till after the 1st 15 minutes.

17:27
That for me is a little bit too much risk to take on. I’m not saying that it’s wrong for somebody else to do it just for me personally, I like to keep a little tighter lid on the risk than that. So with that being said, if you enjoyed this podcast episode, if you’re watching it on YouTube, make sure to like and subscribe so you get the notifications.

17:43
If you’re listening on Spotify or Apple, Google, Amazon, one of these other platforms, make sure to leave a review—a five-star review at that. That would be great. Make sure that you’re sending me your questions, the things that are bothering you most about trading. Tell me your story because I want to hear this story. I really enjoyed hearing about Claude’s story over in Tasmania, Australia.

18:01
And it’s probably pretty cool for you guys to see too that it’s not just people in America that are trading in the US market, that people in Australia and in Europe and in Africa, all over the place. So make sure to keep sending me your emails. ryan@shareplanner.com. Thank you guys and God bless.

18:17
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18:35
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18:55
All the best to you and I look forward to trading with you soon.