The One Cancels the Other (OCO) order does just that; if one order is executed, the second order is cancelled. Effectively it means that you place two orders simultaneously, but run with the trade that triggers first.
Let’s say a trader wants to do one of two things; either go long (to buy) Westpac CFDs should the price break above $23.30, or go short (to sell first and buy back later) should the price drop to $23.00. If $23.30 is triggered, then the trader will take the long trade and cancel the short trade. But if the $23.00 order is triggered, they will take the short trade and cancel the long trade. This order is used when a particular CFD or market may have been trading within a range and a break outside the range may allow the trader to take advantage of a move upward or downward.
The OCO order is also useful for taking profits and limiting losses by using a combination of a ‘limit’ and a ‘stop’ order. Let’s say a trader is long 2000 BHP CFDs at $27.70, but will cut the position should BHP fall to $27.00. The first part of the order is therefore a ‘stop sell’ at $27.00. But if the market rallies, they will exit the trade at $28.40 and take profits. The second part of the trade involves placing a ‘limit sell’ at $28.40. Whichever order is executed first, the other order is cancelled automatically.