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Bracket Order Explained

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An intraday trading order known as a “bracket order” is one that is made alongside orders on the other side of the trade to limit losses or maximize the likelihood of profit. For intraday traders, it provides an additional risk management tool.

An entry, target, and stop-loss (SL) option are provided by a bracket order (BO), together with the option to trail SL, all within a single order window.

Three orders are placed concurrently in a bracket order. For example, a sell limit order on the high side and a sell stop order on the low side frame a buy order. One of the orders in the brackets is completed and the other is canceled when either of the prices is met.

Trading with bracket orders reduces the danger of losses by isolating emotions from the transaction, making it the safest intraday trading method. The transactions are controlled by the stop-loss (SL) orders put in place using the bracket order.

Bracket orders offer greater leverage than MIS because they simultaneously place a stop loss order with the initial buy or sell order. Due to the usage of stop-loss, the leverage offered is also higher because the risk is relatively lower than that of the bracket order broker.

The commission for a bracket order is the same as the commission for any intraday deal. The option to order brackets is available without any additional fees. Stock brokers provide additional benefits to traders who use bracket orders by raising the trade’s exposure limit.

Bracket Order Advantages :

  1. With predefined stop-loss orders, the chance of unconscionable losses during intraday trading is decreased.
  2. Eliminates emotion from intraday trading.
  3. At the BSE, NSE, and MCX, bracket orders are accessible in the trading of stocks, options, currencies, and commodities. Different brokers have different offerings.
  4. The margin needed to open a position with BO is half that needed to open a position with MIS.
  5. The trader has the option of manually setting the target and stop-loss in a single transaction.
  6. When the price swings in your favor, you can also use the trailing stop loss option to boost your gains.
  7. BO offers security in the event that internet access or broker communication is lost.
  8. Customers can manually close a position without waiting for the target or SL order to activate.

Disadvantages of Bracket Order :

  1. A trader cannot partially quit a position in BO. He must leave immediately.
  2. During exit, limit orders are not permitted. The executed exit price will be the market price and may slide significantly from your assumption by going up or down.
  3. Once entered, a bracket order cannot be canceled. Only by closing the position is it possible to complete the order.
  4. Stock options, currency options, and commodity options do not allow bracket orders.
  5. Bracket orders are only offered by brokers like Zerodha in the NSE and NSE F&O BO is not available for trading at the BSE or MCX.

Zerodha Bracket Order Brokerage Charges :

If the entry order is performed in tiny batches for flat rate brokers like Zerodha, which charges Rs 20 per transaction, the system produces a distinct target and SL order of each batch based on the price of the entry order. Instead of paying Rs 20 as brokerage to square-off the entry transaction once, the customer ends up paying “flat Rs 20 or 0.01% whichever is lesser” fee for each of these target/SL orders executed.

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