What is a bracket order?
Bracket orders are designed to help limit your loss and lock in a profit by "bracketing" an order with two opposite-side orders. This way, you decide both the ceiling and floor prices for squaring off your position while entering a trade.
A bracket order combines three orders in one.
- An initial order
- A corresponding stop-loss order (2nd leg)
- A corresponding profit objective limit order (3rd leg)
If the stop loss trigger price is hit, the stop loss order gets executed as a market order and the 3rd leg (the profit objective order) automatically gets cancelled. Similarly, if the profit objective trigger price gets hit, the 2nd leg stop loss automatically gets cancelled. If the condition for the two limit trades is not met by 3:15pm, the order is automatically squared off (unless its manually closed by the trader).
For placing a bracket order, you need to specify a trigger price (in ₹ or in %), the limit price, a stop loss price (your floor price) and the target price (your ceiling price). You can also choose to add a trailing stop loss here.
There is also an additional field called “Trailing Stop Loss". When you place a bracket order, you get an option to either place a fixed stop-loss order or also an ability to trail your stop-loss. In Trailing Stop Loss, if the stock or contract moves in your direction by a particular number of ticks, the stop-loss will go up/down based on if you are long or short automatically.