What is bracket order & trailing stop loss in connection with stock market?
The world moves too fast and is often too difficult to keep track of. Markets move even faster and in all this turmoil, bracket orders come as a great boon in managing your risks. As the name goes, Bracket orders “bracket” your “orders”. It is an intraday order which can not be converted into delivery. However stupidly simple that may sound, that’s what it actually is.
Benefits of Bracket Order
- Bracket orders make sure that your profit or loss lie between two limits of an acceptable profit and bearable loss that you set.
- Because the maximum loss is limited,the margin requirements are really low (between 2% and 2.5%) compared to the 10-11% margin requirement in other risk based trades.
Say I were to buy 200 stocks of a company at Rs 100 each and I feel that it will probably cross Rs 104 and even if it goes till 99, I am ready to take that loss for the chance of a gain. This is when a bracket order comes in handy where I can programme my online trading software to buy at Rs 100, sell as soon as the stock hits Rs 104 or goes down to Rs 99.
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This is done by placing three orders simultaneously.
- The first is the limit order for the buying or selling exercise that you are looking for.
- The second order is a profit booking order that you set as the profit that meets your expectations.
- The third order is a stop loss order. A stop loss order helps you exit a position as soon as the stock hits that bottom of loss. This order is a reflection of the loss that you are willing to take with the stock in concern.
All these orders are placed simultaneously and are mutually exclusive but as soon as any one of the profit limit or stop loss is hit, the other is cancelled. It is also important to note that a bracket order is an intraday order and needs to be squared off at the closing of the day at or after 3:15 pm (1515 hrs IST).
Also Read: Stop Loss Orders Made Easy
Trailing hurt your Stoploss: Security that does not profits
Along with these features, there is a cherry on top called a trailing stop loss. A trailing stop loss is the dynamically adjusted version of a normal stop loss. It changes the value of a stop loss in your favour when the market is moving in a direction that can earn you profits. It helps you reduce the potential loss that you might incur during online trading. This is an optional feature that you may or may not keep. You can still choose for a normal static stop-loss like you do while placing a cover order.
Bracket orders are, in very simple words, a way to take your emotions away from your actions and make a more calculated decision about your trade.
Please note as per the exchange regulation of peak margin reporting, peak margin penalty is charged if there is margin shortfall. Hence, CO/BO are disabled for NSE FNO, CDS and MCX. You can place a bracket order for NSE cash for intraday only.
A Detailed Example
Now say NIFTY is right now at 8580 and by my study of the charts, I am sure it will move to 8630 (up by 50 points). On NIFTY, one tick, or the smallest value by which the exchange must move to reflect a change, is 0.05. Hence 50 points is 1000 ticks.
So I place a bracket order to buy a lot of NIFTY at 8580 (limit order). I know that the maximum loss that I am ready to bear given the possibility of profit is 25 points. Which means that I need a stop loss at 25 points (8555).
On initiating a bracket order I will have to enter a limit order value for buying the lot (at 8580 in our case). The next step is to place a profit ceiling. As mentioned before, I think that there is a fair possibility that the index will move up to 8630, hence that is where I will place my sell order as a target. So I can enter 50 points, or 1000 ticks as my target in the software. (you can chose to enter values in ticks or absolute points by clicking the appropriate box)
The last step is placing a stop loss order. Now here in a bracket order, you have two choices. One is a normal stop loss order where your lot will be sold automatically once the exchange hits a bottom line that you set (Say 8555 in our case). So I place my stop loss at 25 points or 500 ticks.
However, there is a small catch. In a scenario where the index goes upto say 8625 and then falls back all the way to 8540, I will book a loss even after having had the possibility of making money.
A more elegant option however, that is made available in a bracket order, is to have a trailing stoploss.
Say I choose a trailing stoploss of 25 points or 500 ticks and set trailing ticks (absolute) at 1 point. So every time the index moves up (in my favour) by one point, my stop loss value will move up by one points. That way if the index goes from 8580 to 8583, the stoploss will now be at 8558.
Hence in the event where the index goes up to 8620 and then comes back down, my stop loss will rise to 8595 and I will still make money against the initial limit order of 8580.
That is how a bracket order works in online trading software, the moment one order among the Stop-loss or the target order is executed, the other is automatically cancelled.
Placing an Order
Buy Bracket Order Entry: Shift+F3
Sell Bracket Order Entry: Shift + F4
Or right click on the scrip to choose Bracket Order Entry
Also Read: Now Pledge your shares for extra margin
Modifying or Exiting a Bracket Order
Whenever you wish to move out of a bracket order, simply click on the target or the stop loss in the order book and click exit or you can simply change the target or SL value to the market price.
Margin in Bracket Orders
Bracket Order positions carry lower margin requirements because of the mandatory stop-loss placed in the beginning of the order.
We provide you 5X exposure for bracket orders. So, for buying 25 NIFTY at 8429 you would only need a margin requirement of around Rs 4214 (10% of 8429*25, and 2% of that given the 5X exposure). This comes down to an effective margin requirement of around 2%. Something pretty amazing for the sheer volume that you get to trade with.
To read more about the margin requirements in various segments, visit our knowledge base
We hope this article has helped you better you understanding about bracket orders, their uses and their effectiveness in a volatile market situation.
Start Online Trading Using Bracket Order
If you still have any questions or would want us to explain other similar online trading concepts through our blogs, please feel free to comment down below and we’ll make sure we address your concerns.
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Thank you for pointing out. We will do the corrections.
Is there an error in your math in first paragraph? Should stop loss be 8555 which is 25 below 8580? Or are you setting that price due to buy/sell spread?
“So I place a bracket order to buy a lot of NIFTY at 8580 (limit order). I know that the maximum loss that I am ready to bear given the possibility of profit is 25 points. Which means that I need a stop loss at 25 points (8550).”
[…] Know how bracket order & trailing stop loss drives the market movement & proves to be a boon in the market track down with examples. To read more in detail, click here at TradeSmart. […]
if barcker order available for comodity , currency , index and stock option also . i saw when i try to place bracket order 1st order is always limit order but for cover order i can place market order
“Say I choose a trailing stoploss of 25 points or 500 ticks and set trailing ticks (absolute) at 1 point. So every time the index moves up (in my favour) by one point, my stop loss value will move up by two points.”
Sir, in the above instance, will you please explain me why with every up movement of the index by one point the trailing stop moves by two points.
bracket order how to use the cash equity delivery order?
[…] Also Read : Bracket Orders and Trailing Stop-loss Explained […]
[…] time the market moves in your favour. It’s a feature available with bracket orders and we have a blog about bracket orders. Stop Loss orders can be made an integral part of your order if you use a cover order or a bracket […]
Hope we addressed your query in the below post. Kindly let us know in case you still have questions.
Let us take an example to explain you ticks and absolute.
Example: As you know BO has three orders. 1)Buy order 2)Target sell order and 3)Stop loss sell order. Let’s say you are placing buy bracket order(BO) for ACC at Rs.100. ACC stocks moves with the tick of 0.05. Suppose you want to sell ACC at 102. Here, you would require to select Ticks or Absolute in sell orders, as per your convenience.
1) Suppose you select ticks then you are required to mention 40(2/0.05) in sell orders. This means, every rupees increase in price consists of 20 ticks. You are selling Rs.2 higher, hence it involved 40 ticks.
2) In case you select Absolute then you just have to mention the difference between buy and sell price ie. 2 (102-100) in sell orders.
Above example your saying ticks 40 or point 2
What is difference between ticks and point
You can see your current trigger price in pending orders. You can also double click on pending order to know the history of order placed.
If last trading price(LTP) moving in my direction ,then how can I know the current trigger price of stop loss order of Bracket Order using Trailing Stop loss, ( if I am using NEST)
Can you please explain the same using an example of Nifty Options?
As per your telephonic conversation with one of our executive, hope your query regarding partial exits of bracket order is resolved to your satisfaction.
Hmmm.. Only limit order entries… No partial exits… Not much useful…. Hope you guys dont get inspired by BOs and do away with SL entries and partial exits with regular orders….
Currently, there is no feature for partial exit with Bracket Order facility.
Is partial exits possible with BO?
Thanks Chandrasekaran. Glad to know you liked the feature. We are committed to providing all our users an awesome service and products.
We recently started a funding facility and margin against shares. Hope you are aware of both these.
It is really an excellent platform for the intermittent traders Like me.
An awesome and excellent product I can say this BO.
One fine day I got my order executed in Stop loss as well profit trigger and went so away from the re-executed point.
I end up with triple loss on that day. I was thinking of this kind of opportunity to place all three orders together which will get cancelled once either side trigger up.
Thanks a lot on thinking of Customer value.
Keep it up.
Glad to know you liked the article.
Sorry this feature is not available in NOW and is available in NEST only. We would have liked to offer it in NOW too but NOW is managed by NSE and this feature has not been added from their side itself.
In case you would like to switch to NEST please send us an email at support @ vnsfin . com and we will take care of the same.
This is what I am looking for. Thanks for sharing this valuable information with good explanation.
As this order placement is not possible with NOW mobile app, is it possible if I have desktop application of NOW software?
Also is it possible to place Bracket Order through call & trade.
You can set trailing stop loss in Ticks or Absolute as per your convenience. Tick size is the minimum price movement of stock.
Example: If you are trading in stock “A” with the Tick size 0.05 then the minimum Tick size you should mention is 20(1/0.05). In case you use “Absolute”, you need to enter at least “1” and not decimal. In your example, select “Absolute” and enter 2. For more information, please refer our detailed blog for Bracket Order.
Can you please confirm trailing stop loss working only in ticks or it can be set for absolute
for example if i please order absolute Sl Rs 10 and Sell off Rs. 20 and in trailing stop loss window 2 that means 2 ticks or Rs. 2 ??
the margin money for BO order doesn’t work .ex. I want to sale sbin 250put @0.25 As u say 0.25*2000*2% margin will be 10.0 but the exchange says margin required 12514.5 it doesent give proper answer.( If we cal fut. 241.6*2000*2% =9664.
your margin BO formula does not work at all.
Thank you for your response. Yes, bracket orders can be used to trade in Nifty options as well. The tick size for all NFO (NSE Futures and Options) securities is 0.05 points. The function of trailing ticks remains the same for all cases.
Ticks are a property of how the exchange looks at a stock price and are not a function of the segment. NFO or Nifty futures and options have a 5 paise or 0.05 point tick threshold. The BSE cash segment that we provide works on a 1 paise or 0.01 point tick threshold.
Hence ticks are a function of how the exchange looks at a certain security’s price change.
NOW Trader is the NSE software and it is controlled by NSE team itself. In case BO is made available in NOW by NSE, we would be happy to provide you BO trading.
Please let us know in which instance your NEST Trader hangs. You may also raise a support ticket on email@example.com for your NEST query so that we can check and assist you accordingly.
Thank you for your response! We sure will real soon!
Thank you for your comment. I am sorry that we aren’t able to provide the BO feature in the mobile app just yet. The reason being that the exchange doesn’t allow BO to be placed from a mobile device. Hence the problem. Apart from that, there is nothing that is stopping us form providing you this feature and making your life easier. Meanwhile we will stay in touch with the exchange for any available updates on the same.
To answer the second question directly, your stop-loss in the end of the scenario will be 1216. Trailing stop-loss is the stop-loss that trails (moves) in favour of your position and not against it. When the stock moves up again by 5 points, the stop-loss will only move once the stock crosses the earlier threshold of 1224. Hence your new stop-loss will be 1216
[…] For more details with example, you may refer to Trade Smart Online blog. […]
[…] Know more about Cover Order and Bracket Order. […]
[…] Bracket Order […]
Its been irritating..Its already 3 months now, still its not part of Unlimited plan..So disgusting..If you are sincerely working on it..it does n’t take this much time..I would say very poor service to clients..
When will be BO feature made available on mobile platform, this is really causing inconvenience.
One question on BO –
Scenario – stock limit price – 1220 Stock Target Price- 1230 Trailing SL – 1210 (1 point)
If stock moves up by 4 points to 1224 , SL moved to 1214
now stop moves down by 3 points i.e 1221, (SL still at 1214), and subsequently stock moves up by 5 points (i.e 1226), where will be my trailing SL by now ?
Please make a video
Is there any plan to introduce bracket orders for NOW platform? I had shifted to NEST platform to avail the bracket orders facility, but it used to hang quite frequently, therefore I have shifted back to NOW
Can the same ticks will be used in option segment or it is diffrent in option segment. Like 0.05 in nifty stand for 1 tick.
Can bracket order will be used in Nifty option and if yes then what is the Trailing ticks in traling stop loss for Nifty option segment. Please tell
Its good to hear that you are working on it but it is really taking much time.(almost 2 months now).
Could you please also take care of the below glitches with BO.
1. Not Available for Unlimited Trading Plan.(as mentioned earlier)
Providing the feature for other trading plans and not providing it to Unlimited plan is totally unfair. I understand, there might be a cost associated with the Bracket order. If that is the case, this has to be dealt in a different way (like Unlimited plan with BO feature is at 1899+Rs. X). This need to be sorted out very quickly.
2. Not able to see Bracket order on mobile.
When logged into VNS terminal via mobile, not able to see the bracket order feature. Also not able to view the bracket orders that were already placed through my laptop. This is a limitation and its causing inconvenience for me. I usually trade till 1:00 PM and after that log in via mobile.
3. Bracket order window defaults (Technical)
This is regarding the defaults set on the BO window. It defaults to ‘Ticks’ but I would recommend it to default to ‘Absolute’. Since many uses ‘Absolute’ It makes sense to default it to ‘Absolute’.
4. RMS CASH CREDIT – Updates
Surveillance –> RMS Limits –> Client Cash Credit (Ctrl + 1), This is not getting updated properly for Bracket order. The “Net Amount” is not reflected even after placing BO orders. The Net has to be reflected and this gives an idea for the customer how much more amount is left to trade.
5. Bracket order – Margin.
I understand that Bracket order gives more margin limits for the trader because of the max SL of 2%. Can we have a feature where the max SL is 1% and which might allow to provide more margin limits. If not for all scripts this can be utilized for specific scripts or for Index.
As an organisation, we have already taken all possibilities into consideration and made the decision we made. These considerations included your proposal which was kept on hold only after taking several parameters into consideration. I will refrain from stating them here as it does not fall into the narrow scope of information that this article is aimed at.
I completely understand your concern and trust us when we say that we are working on it. There are broader business consequences to large scale plan changes that come into play and we are attempting our best at handling them in a way that brings out a long term solution profitable both for our clients as well as for our business.
I hope you will understand our aversion from frugal approaches to problems. We are doing so keeping both our best interests in mind.
Thanks for addressing my concern but its the same old story you are telling for last 1-2 months(ever since bracket order is introduced)
Significant cost associated with Bracket order. What does this mean?
How much is the cost for each bracket order? Rs.1 or Rs.1.5 or Rs.2,x…??
Lets say, If it is Rs.x for each bracket order..why can”t you follow the below.
1. Include Bracket order feature in Unlimited trading plan @1899 and say..for each bracket order executed an extra Rs.x will be charged from the customer.
Instead of that, you are passing time saying that significant cost associated with BO order.
I hope the above solution will help you in quickly coming up with a plan to include BO in unlimited plan.
Regarding margins, RKSV and Zerodha are providing a better margins for equity F&O.
As we mentioned before, we will be finding a work around to this problem but it might take slightly longer than time in days.
You would understand this limitation given how there is an incremental cost involved for every bracket order placed and hence it wasn’t possible for us to provide it as an unlimited plan feature right away.
As for our new customers, all the people coming onboard are aware of the fact that the bracket orders feature is not available in the unlimited trading plan. Our sales and support team is very transparent in this matter and we do not believe in withholding any information from our clients that might hurt their interest.
Any updates on including bracket order in Unlimited trading plan.? If not, you people need to update the new customers of this?
I am utterly disappointed for not including this under unlimited trading plan and i do not want this happen to new customers.
We completely understand your predicament. But as we stated before, it remains our Endeavour to improve the experience of every user that traders with us and hence we are working on a way to help you and all our unlimited plan clients to access the feature of bracket orders.
We should be out with an update soon but until then we request you to kindly bear with us.
Thanks and Cheers
This is absolutely irritating. Providing a feature for some plans and not for some plans. There are other brokers like RKSV, SASonline, Tradeplus…clients can easily shift to if Bracket order is not part of Unlimited plan. Some brokers are offering trading plans of unlimited equity trading at 899per month. (Less than half of what tradesmartonline is offering).
How do you expect clients stay with us, if features like these are not part of unlimited trading plans…??
Thank you for your comment. Can you point out your exact trouble with the current example so I can form an example that addresses that issue in particular?
For starters, you can say that A trailing stop-loss is a stop-loss feature in bracket orders that follows the market when it is in your favour.
The usual case is where you put a stop-loss. The market comes close to your target but does not hit it and starts falling, then goes below your strike price and ends at your stop-loss. This will make you a loss. But if you could’ve sold the stock when it was above the strike price, you could’ve made a profit.
A trailing stop-loss addresses this problem. You need to set a stop-loss as you do in case of a normal stop-loss. After this you set the trailing ticks. Or a number (step) by which you need the stop-loss to move every time. These are called your trailing ticks. Let’s say you set it at 2 points or 2 rupees.
Once this is set, whenever the market moves up by the number of points that you set, say 2 in our case (let’s assume upward movement is profitable in our case), the stop-loss will come up by 2 points. So if the market was at 8540 (NIFTY) and you put a stop-loss at 8520 with 2 points or 40 ticks as your trailing ticks, when the market gets to 8542, the stop loss will become 8522. And will keep increasing every time the market goes up. Now if the market goes above 8560 (and let’s assume your target was at 8570) the stop loss will become 8540 which was originally your strike price. Now if the market goes to 8568, the stop-loss will become 8548. At this point of time, if the market starts falling, your position will square off once the price reaches 8548 (since that is the new stop-loss) and you will make an 8 point profit instead of making a loss.
I hope this example helped you understand the concept better. If you still have doubts, as I said, write back here with your specific confusion and we will solve it for you.
I want more examples to learn how to place BO. with trailing tick’s.
Thank you Rajeev!
If you have any suggestions or topics that you would want us to write on, please feel free to reply with your thoughts here.
Very useful innovation on your trading platform. I have sent a separate mail to covert to NEST.
Thanks a lot Mukund!
If you have any suggestions or topics that you would want us to write on, please feel free to send in your thoughts to firstname.lastname@example.org
Thanks a lot Jasmine!
If you have any suggestions or topics that you would want us to write on, please feel free to send in your thoughts to email@example.com
Bracket orders are available with NEST only. In case you wish to move from NOW to NEST, please drop us an email.
It is our endeavor to continuously improve the experience for our clients. Introduction of bracket orders was a small effort in that direction. However, there is a significant cost involved in the same. To be able to offer such services it is important not just to burn cash but also be able to make money out of it. Without profits, services suffer and we strongly believe profits are the lifeline of any sustainable business.
We did not want to pass on this cost to people not using this service and wanted to be able to share the benefits with people who can also benefit from it. Unlimited trading plans have their own advantages but they do not allow us to earn incrementally from such additional investments.
Hence we are currently unable to offer it for those plans. In case you wish to avail bracket orders, we’d request you to kindly change your pricing plan to the 0.7p or Rs 15 plan. We will also explore other opportunities where the unlimited trading plan can also offer the same but it might take some time.
This is an excellent feature and I still do not understand why this cannot be availed by customers who opted for unlimited trading plan. This is so disgusting and frustrating.
Please reply me.
Is bracket order available on NOW platform? I am a big fan of bracket order, saw that with IciciDirect. I have only NOW system. can I use bracket order?
Excellent!Keep it up guys!!!!
I see the below line in the mail received.
Please note that, the Bracket Order feature is available for .7 paise and Rs. 15 per executed order trading plans.
What does this mean?
Its not applicable for customers who opted for unlimited trading plan. If so Why is it like that? If so, thats really bad. I am not seeing any reason why the customers with unlimited trading plan cannot avail it.
Is the bracket order feature available for customers who has opted for unlimited trading plan ?
Thanks a lot for your comment! Your encouragement keeps us going!
If you have any doubts or queries that you would want us to write about, do feel free to drop in an email to firstname.lastname@example.org
Very very good improvements. I am so happy that you think for your clients & their requirements in trading.