A Bracket Order is a special type of order through which you can take an intra-day position and take advantage of extra exposure while being protected through a stop loss order and a profit booking order.
This can be placed by three orders simultaneously,
- The first is the limit order for the buying or selling 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. As soon as any one of the profit limit or stop loss is hit, the other is cancelled. Profit or stop loss order is not going to be placed unless the limit order is executed. It is also important to note that a bracket order is an intraday order and needs to be squared off before intraday closing of 3:10pm.
Benefits of Bracket Order
- Bracket orders make sure that your profit or loss lies 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.
Click here to know the intraday margin required for Bracket Orders.
For know more information about bracket order and trailing stoploss, you may refer to TradeSmart blog.
Note: When placing a bracket order if the order gets filled in multiple executions (this happens when there are not enough counter orders available in market matching your order quantities and prices), each of the execution will be considered as a separate order and you will be charged brokerage & taxes separately for each partial fill. The same applies for auto-square off charges too if squared off by our RMS team.