Bracket Trading : What is a Bracket Order (BO) and How to Execute it?

Bracket Trading is a concept in trading and investment banking world which is considered to be a broad concept in itself. Most of the stock exchanges allows Bracket Trading (We will be using Bracket Order and Bracket Trading inter-changeably as they are same). However, very few traders are actually aware about Bracket Trading and racket Order. The main reason behind this is ‘most of the brokers generally do not provide the feature of Bracket trading in its purest form.

Bracket Trading : The Concept

Bracket Order is a special type of order in investment world which allows you to enter new trade / position and also provide with target or exit criteria along with a stop loss for the order. This definition might be very difficult to understand, so here is a complete explanation in three points :

  • In Bracket Order, we enter a new trade in system with details such as price and quantity like any other order.
  • Next, we need to set a target for this position i.e. at what price you are ready to exit the position/ trade.
  • Simultaneously, we need to add a ‘stop-loss’ to the order i.e. minimum loss for which you want to exit if the trade goes against your prediction.

Whenever, any one condition out of last two is met, the trade is completed. We can think of Bracket Order as Trade which consists of three individual trades.

In fact, there is a new concept called ‘Trail Stop loss’ introduced by few brokers which also allows the order’s stop loss to be modified automatically if the trade is going in positive.

Points to Note About Bracket Order

  • Bracket Orders are only valid for Intra-day i.e. same trading day.
  • Brokers auto-cancel any pending order at trade closure for the day. (You may be charged cancellation fee depending on broker).
  • Usually Bracket Order is available for Equity, Future, Options and currencies.
  • Most of the stock exchanges do not allow Bracket Order for commodities.

How to Place Bracket Order – Zerodha (My Broker)

I am using Kite from Zerodha. Here is how I can place Bracket Order with them in Indian trading market.

  • Select the Equity/stock you want to place a bracket order for. Select the action you want to perform i.e. Buy / Sell.
    select trading action i.e. buy or sell
  • On the Order screen, select BO or Bracket Order.
    bracket order
  • Fill the details as needed i.e. Quantity, Price, Stop Loss, Target and Trailing Stoploss.

With this, you will be able to place bracket order easily.

Why Trading on AI Blog?

We are soon going to tell you AI based techniques for trading. Hence, a few trading topics are necessary to set the right context.

One thought on “Bracket Trading : What is a Bracket Order (BO) and How to Execute it?”

  1. Hi Ankit,

    Interesting. I am slowly and surely learning more about trading. I did a fair share of stock trading a long time ago and some Forex but am now learning of the cryptocurrency game. Thanks for sharing 🙂

    Ryan

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