A bracket order is a strategy that is used by traders usually in intraday trading. The bracket order includes a target order, an initial order, and a stop loss order. In which first we execute the initial order like buying or selling any share or securities and after that, we set a target order which means the specific price of the order at which we want to close our position in trade then in last we set a stop loss which mean the price at which we want to close our position in trade to minimize or limit loss from trade. We can understand bracket order which includes three types of orders in trading.
Primary or Initial order
It is the first or initial order which is executed by a person to buy or sell any security in the market. This can be executed at market order or limit order which means executing a trade at the current market price & executing a trade in the market at a specific price respectively.
Target order or profit order
In the target order trader, we set a price at which we want to limit profits from trade, in this trader sets a higher price from its entry price (in buy) or lower than the entry price (in sell). This order helps the trader to close the trade at a profit while trading in the market.
Stop loss order
The stop loss order helps the trader to close the position of trade to limit loss if trade going in the opposite direction. The stop loss is generally set below the price of entry in trade in the buy position and a higher price from the entry price in the sell position. The price of trade hits the stop loss level the order is triggered for the best market price.
In the bracket order strategy, an order is placed on two opposite sides when we initially make an order in trade. Here are two conditions that arise when you buy a security or sell a security, if your initial order is to buy a security then the order will be bracketed by a limit to sell the order usually higher than the buying price and the other is stop loss order which lower than the price of buying to control the loss from trade which is unfavorable for us. In order when we want to sell any security in the market, in this situation the target order we set is below the price of the initial order at which we sell a security, and when the price hits the target order we buy the security again and the profit is difference between the selling and buying of security.
Example:
Buying a share or security
In this, as a trader, you analyze a share and you believe that in the future the price of a share will increase, so you buy the share at a current market price of ₨250 and set the target order for the share as ₨290 and stop loss of ₨240. In this, as the price of share increases and touches the price of ₨290 the order will execute to sell the share in which your profit will be (₨290-250) ₨40 on each share. But if the share moves adversely and touches the price of ₨240 it triggers to sell of the share, in this your loss will be (₨250-240) ₨10 on each share.
Selling of share or security
In the selling scenario as a trader, your analysis predicts that in the future the price of a security will fall, so you sell the security at the current market price which is ₨300 (initial order), and set a target order of ₨280 as security price touch the target order price you will buy again the security in this profit will be ₨20 per share. But if the security price moves oppositely for that situation you set a stop loss order higher than the price of the primary order, it will minimize your loss in trade.
Why you should use bracket order
Traders use basket order because it helps in risk control while executing a trade in the market by setting the target order for upside and stop loss order for downside price which helps to reduce the risk of trader while buying and selling shares. Bracket order also helps traders to protect from market volatility & reduce monitoring in trading which saves the capital of traders and time by providing automated risk management.
Downside of bracket order
Bracket orders are not changeable if the target order or stop loss price is activated you cannot change it which shows the rigid nature of the bracket order. As the market also moves in volatility the price can move quickly to the downside and this can give premature trade exist which could affect the profit margin of the trader. Another downside of bracket order is that it will not operate properly when there is low liquidity in the market which limits the scope of bracket order.
How to use Bracket Order with Moneysukh
In Moneysukh you can use bracket order (BO) efficiently and easily in three simple steps-
- Login to Moneysukh and and search your scrip you want to trade
- Select Buy or Sell and in product section you will find all types of Orders including Bracket Order (BO) with Intraday and delivery order.
- Select Bracket Order- Fill your Stoploss and Target and press Buy Sell Button. That’s it. No complications, No unnecessary selections.
