What is Bracket Order

A bracket order is a powerful tool used in intraday trading to manage risks effectively. It links a primary buy or sell order with two additional orders — a stop-loss order and a target order. This three-in-one order helps traders automate risk management by defining their potential loss limits and profit targets in advance. Bracket orders are particularly beneficial for intraday traders looking to execute trades with precision while minimising risk.

Investments in securities markets are subject to market risks. Please read all scheme-related documents carefully before investing.

A bracket order is designed to simplify and automate the trading process in intraday trading. It involves three interconnected components:

1. Buy/Sell Order: The primary order to initiate a trade.
2. Stop-Loss Order: This order automatically exits the trade to limit losses if the price moves unfavourably.
3. Target Order: This order locks in profits by exiting the trade when the price reaches a predefined target.

For example, if you buy a stock at Rs. 100, you can set a stop-loss at Rs. 95 and a target at Rs. 110. If the stock price hits Rs. 95, the stop-loss order is triggered, minimising your losses. Similarly, if the price reaches Rs. 110, the target order is executed, securing your profit.

By linking these orders together, a bracket order ensures that the trade is automatically managed without requiring constant monitoring.

Bracket orders offer several advantages, particularly for intraday traders:

• Automated risk management: By setting predefined stop-loss and target levels, traders can minimise risks without manual intervention.
• Improved trade execution: The automated nature of bracket orders ensures timely execution of stop-loss and target orders, even during volatile market conditions.
• Predefined profit and loss: Traders can plan their trades better by knowing their potential profit and loss in advance.
• Reduced emotional trading: With automated orders, traders can avoid impulsive decisions driven by emotions.

These benefits make bracket orders a preferred choice for traders looking to streamline their trading strategies and manage risks effectively.

Both bracket orders and cover orders are used in intraday trading, but they differ in structure and application. Below is a comparison:

While both orders assist in risk management, bracket orders provide a more comprehensive solution by allowing traders to set both profit and loss parameters.

Bracket orders are indispensable tools for intraday traders seeking to manage risks effectively and execute trades with precision. By automating stop-loss and target orders, bracket orders help traders focus on their strategies without worrying about market fluctuations. Whether you are a beginner or an experienced trader, understanding and utilising bracket orders can significantly enhance your trading efficiency.

Investments in securities markets are subject to market risks. Please read all scheme-related documents carefully before investing. Past performance is not indicative of future returns.