Bracket Order

Key Highlights

• A Bracket Order is an advanced trading tool that enables investors to manage their trades by setting predetermined profit targets and loss limits.

• Bracket order benefits include risk management, automation and efficiency.

What is Bracket Order?

A Bracket Order is an advanced trading tool that enables investors to manage their trades by setting predetermined profit targets and loss limits.

How a Bracket Order Works?

• Placement of Bracket Order:

The trader initiates a bracket order by specifying an entry price for buying or selling a security, as well as setting two additional prices: one for taking profits (target price) and one for limiting losses (stop-loss price).

• Execution of Entry Order:

Once the entry order is executed, the bracket order simultaneously activates the target and stop-loss orders.

• Activation of Target and Stop-Loss Orders:

Target Order: If the security's price moves in favor of the trader and reaches the target price, the target order is triggered, closing the position and locking in the profit.

Stop-Loss Order: If the price moves against the trader and hits the stop-loss price, the stop-loss order is triggered, closing the position to prevent further losses.

• Automatic Cancellation:

When either the target or stop-loss order is executed, the remaining order is automatically canceled. This ensures that only one of the orders will be active at any given time.

Bracket Order Benefits

1. Risk Management: Bracket orders allow traders to lock in profits and limit losses automatically.

2. Automation: By predefining exit points, traders can avoid emotional decision-making and reduce the need to constantly monitor the market.

3. Efficiency: Bracket orders ensure that trades are executed quickly and efficiently, even in volatile market conditions.

This tool is particularly useful for day traders and those looking to manage risk effectively.