For example: Mr Z wants to buy ACC at Rs 120 and wants to book profit in case of price rise at Rs 145 and book loss at Rs 110 in case of a price fall. Once ACC (with a said quantity) is bought at Rs 120, two more orders are placed for exit at a profit @ Rs 145 and stop loss is created @ Rs 110. So, if his profit target of Rs 145 hits first, he exits his position and the third leg i.e. the stop loss trigger is cancelled automatically and vice versa.
In this way, you enter a bracket range for your position. Where you have a set upper limit in mind as well as you can gauge you maximum loss.
Highlights of a bracket order:
- You can place three trades through one trade simultaneously, giving you an opportunity to minimize your losses and booking profit at your preferred price.
- System makes sure that once your target price or stop loss is triggered, the last leg of the trade is cancelled automatically.
- It also comes with a trailing stop loss functionality where the stop loss automatically adjusts and ‘trails’ the market price.
- Since there is always a stop loss corresponding to each trade, Bracket Orders help bringing more disciplined trading in you.
- Bracket order facility can be used to leverage positions greatly while enjoying the benefits of a stop loss to protect the downside.