What is a Bracket Order?

Understanding Bracket Order in detail

Bracket order is a distinctive type of market order generally placed during intraday trading. This type of order blends a buy order with a target and stop-loss order. These orders are further essential for helping stock traders hold a favourable position after a trading session comes to an end. Nonetheless, the outcome of bracket orders majorly depends on the choice of stock, target levels, and how the trader selects the stop-loss. Given below is a complete guide to what bracket orders are and how they can be distinguishable from cover orders.

What are Bracket Orders? 

To answer the question of what is bracket order, it primarily combines three different orders in one. As the name suggests, a bracket order is solely designed for bracketing your order. In simple terms, this refers to the placing of two opposite side orders along with your initial order. Thus, they are functional for buying as well as selling orders. 

In situations where your initial order is but a buy order, then the stop-loss and raver orders are considered as sell orders. Another similar instance is where the initial order is also a sell order. Here, both the additional orders are considered as buy orders. 

Advantages of a Bracket Order 

Bracket orders come with ample benefits that you can benefit from. The first and foremost benefit that may pique your interest is that bracket orders allow traders to place about three orders all together in a single go. These orders are beneficial for intraday traders that are to hold a profitable position in about 6 hours. 

Many brokers furthermore offer a trailing stop-loss feature that lets the stop-loss level adjust and alter on a real-time basis. This factor, however, is entirely dependent on the present market prices and in which direction they are moving. 

Bracket orders generally help intraday traders to partake risks as bracket orders work in a very comprehensive way. They mostly help traders place a profitable position through the target orders in place. In some cases, they also help undertake losses to a decent extent through the stop-loss orders in place. 

Bracket Orders Vs. Cover Orders

Cover orders are distinguishing types of orders that intraday traders make use of. They are vaguely different from bracket orders. Unlike bracket orders, cover orders combine two orders at a single go. 

Cover orders combine the initial order with a stop-loss order. These types of orders do not attain a profit booking or target order. 

Cover orders are nothing but the unique combination of stop-loss order and initial order. A trader is mandatorily required to place only a stop-loss order with the initial order. Similar to bracket orders, stop-loss orders play a vital role in regulating the risks to a certain extent in cover orders. 

These two types of orders have certain similar properties. Both of these orders get squared off in the very same trading session. When it comes to cover orders, the order will supposedly be cancelled when the trading session comes to an end if the stop-loss order isn’t optimized. Cover orders, moreover, cannot be placed for the following trading sessions. 

What do You Mean By Intraday Trading? 

In a nutshell, intraday trading refers to the buying and selling of scrips in a single trading session. Here, the trader invests in stocks that are extremely close to the opening time of the market and further sells them during the closing time of the market. Traders work towards attaining profit within a single trading session. Thus, bracket orders are placed in intraday trading. 

Summarising Bracket Orders

Now that you know what is bracket order, it is also important to understand if they should invest in them. Any individual must place such orders only if they have complete knowledge of how the stock market functions and the ins and outs of intraday trading. 

There are several technical indicators such as candlestick charts and momentum oscillators to determine and truly understand stocks required for intraday trading. Only with essential knowledge and expertise can traders square off profitable sessions on the very same trading day. 

While this may seem challenging at first, traders will get the hang of it eventually. Make informed stock marketing decisions by studying and researching enough about bracket orders. The above insights are sufficient to understand what bracket orders are in brief.