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What is Bracket Order and Cover Order? November 15 2017Bracket Order

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What is Bracket Order and Cover Order?

The price of stocks in the stock market see a lot of fluctuation. In the blink of an eye, the stock price can take a turnaround. Thus, it becomes difficult to track every movement of the market. If the desired price does not come in the eyes of the investor, it can lead to lesser profits or higher losses. Thus, tracking stock price movement is essential.

To overcome this problem, brackets order is of great help. It helps to manage the risk of the investor. With bracket order in place, the investor can book profits and exit the stock in a timely manner. Let us understand the term bracket order in detail.

Meaning of Bracket Order

Bracket order is a single click order type that allows the traders to place 3 orders at a single time.

·         The first order is the main order i.e. buy or sell.

·         The second order is placing the stop loss, and

·         The third order is profit booking.

By placing all the 3 orders, the trader secures his intraday position in the stock.

When the investor put the stop loss in the bracket order. His loss is limited up to a bearable state. Similarly, when the target price for any stock is achieved, the stock is automatically sold and profit is booked. Let us take an example to understand bracket order in a better way.

Example of Bracket Order

Suppose a trader is willing to buy shares of Reliance Industries. He wishes to place a bracket order. In such scenario. The first order shall be the purchase of stock, say Rs. 900. Now, he wishes to place a stop less, say Rs. 885. The third order in the bracket order shall be profit booking price, say Rs. 935. Here the investor’s shares will be sold if the price of Rs. 885 is hit. In addition, if the price of the share goes on to touch Rs. 935, the profit shall be booked.

Nest we shall under the term “trailing stop-loss order”. The term ‘trailing stop-loss order’ is important when it comes to bracket order. Let us learn its meaning.

Meaning of Trailing Stop Loss Order

When the investor places a bracket order, he has two options i.e. either to place a fixed stop loss or trail the stop loss. Trailing stop loss order is placed when the price of the stock moves in the certain direction. In such cases, the stop loss can be changed either on the upside or downside based on the long or short position.

It has been noticed that often the meaning of ‘bracket order’ is confused with ‘cover order’

Meaning of Cover Order

Cover order is an order type in which two orders are placed at a single time. The first order is the buy or sell order. While the second order is putting a compulsory stop loss.  The cover order ensures that a stop loss is always in place and no order shall be placed without a stop loss. The cover order requires a stop loss that reduces the risk of the client. The client’s loss remains under control. Eventually, the margin requirement also reduces.

The cover order is different from bracket order as it has two orders i.e. the main buy or sell order and putting the loss. On the other hand, bracket order comprises of three orders that are placing the buy or sell order, putting the stop loss and putting a profit-booking price.

About Us

Indira Securities is one of the prominent financial service providers. The wide range of services includes trading in equity, derivatives, commodity, currency, etc. Our in-house experts and professionals keep recommending stocks to the clients. We try to maximize our client’s profit with the help of bracket order and cover order. We suggest them the right support and resistance levels to place the orders. Furthermore, our clients have the privilege to avail our services through our mobile application. It works smoothly and easy to use. Open a demat account with us and avail our services. You can reach us via phone or email for further information.

 

 

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