OCO Exit Engine Deep Dive

What is the OCO Exit Engine?

OCO (One-Cancels-Other) is a sophisticated exit management system that monitors your positions in real-time and executes your exit strategy automatically. Instead of manually watching each trade, the OCO engine handles everything 24/7.

How It Works

• Event-driven real-time monitoring (<50ms updates)
• Tracks position P&L against your exit targets
• Executes partial or full closes based on your rules
• Adjusts stops to breakeven after hitting targets
• Handles trailing stops as position moves in your favor
• Logs all actions for performance analysis

Module 1: How OCO Orders Work

Traditional OCO orders cancel one order when another fills. RelayDesk's OCO engine extends this concept:

• Multiple take-profit levels (up to 3)
• Each TP can close a different percentage of position
• Stop loss protects entire position
• Trailing stops activate after TPs fill
• Breakeven adjustment after first TP hit
• All orders work together as one strategy

Module 2: Configuring Take-Profit Levels

Take-profit levels let you scale out of positions progressively:

TP1 - First Profit Target

• Typically set at +25-40% for options
• Usually close 50% of position
• Quick profit capture
• Reduces overall position risk
• Triggers breakeven adjustment

TP2 - Second Profit Target

• Typically set at +50-75%
• Close 50% of remaining (25% of original)
• Locks in larger gains
• Leaves runner for further upside

TP3 - Final Profit Target

• Typically set at +100-150%
• Close remaining position (or leave 25% as runner)
• Maximum profit capture
• Optional with trailing stop

Module 3: Setting Stop-Loss Orders

Stop losses protect your capital when trades go against you:

• Set as percentage below entry price
• Typical range: -20% to -40% for options
• Tighter stops reduce max loss but increase stop-outs
• Wider stops allow more room but risk more capital
• Consider underlying volatility
• Account for bid-ask spread

Module 4: Trailing Stop Strategies

Trailing stops lock in gains as price moves in your favor:

Trail from Entry

Activates immediately from entry price, independent of take-profit levels. Good for trending markets.

• Set trail distance: 10-20% typical
• Stop follows price up automatically
• If price drops by trail distance, position closes
• Works well for breakout strategies

Trail After Final TP

Activates only after all take-profits fill. Lets winners run with protection.

• Typical: 10-15% trail distance
• Combines well with scaling out strategy
• Maximum profit potential with downside protection
• Popular for swing trading

Example

With 10% trail: If price reaches $5.00 after final TP, stop moves to $4.50. Price hits $6.00? Stop moves to $5.40. Price drops to $5.39? Position closes at $5.40 stop.

Module 5: Breakeven Adjustment After TP1

Move to Breakeven automatically adjusts your stop loss after first take-profit:

• Triggers when TP1 is hit
• Moves stop loss to entry price (0% loss)
• Eliminates risk on remaining position
• Guarantees break-even or better on trade
• Can add small buffer (+2%) to lock in guaranteed profit

Module 6: Time-Based Exits

Close positions after a set amount of time, regardless of profit/loss:

• Useful for day trading strategies
• Set specific close time (e.g., 3:45 PM)
• Or set duration after entry (e.g., 30 minutes)
• Overrides other exit conditions when triggered
• Good for avoiding overnight exposure
• Prevents holding losers too long

Module 7: Partial Position Scaling

Scaling out reduces risk while maintaining upside potential:

Benefits of Scaling Out

• Locks in profits progressively
• Reduces emotional stress
• Lets winners run without full risk
• Improves overall risk-reward ratio
• More consistent profit-taking

Scaling Percentages

Common approaches:

• Conservative: 50%, 30%, 20% (quick profit lock)
• Balanced: 50%, 50% (half at each level)
• Aggressive: 33%, 33%, 34% (equal scaling)
• Runner: 50%, 25%, 25% (leave more for big moves)

Module 8: Real-World Exit Examples

Day Trading Setup

Fast in and out with tight stops:

• TP1: +20% (close 50%)
• TP2: +40% (close 50%)
• Stop: -15%
• Time stop: 30 minutes
• Move to breakeven: After TP1

Swing Trading Setup

Hold for bigger moves with room to breathe:

• TP1: +40% (close 50%)
• TP2: +80% (close 25%)
• TP3: +120% (close remaining 25%)
• Stop: -30%
• Trailing: 15% after TP3
• Move to breakeven: After TP1

Breakout Strategy Setup

Let winners run with trailing from entry:

• TP1: +50% (close 50%)
• Trailing from entry: 20%
• Stop: -25%
• Move to breakeven: After TP1