Bracket Order

Bracket order is designed where the investor can limit their loss and lock in profit by “bracketing” an order with two opposite side orders.

Buy Bracket Order: A Buy order is bracketed by a sell limit order generally above the buy order price and sell stop order generally below the buy order price. This allows investors to lock profit by an upside movement and limit downside loss.

Example

If you place a buy order for a stock currently trading at $50, along with a sell limit order at $55 and a sell stop order at $45. If the price moves up to $55 or down to $45, the position will be sold. The trader will either meet a specified gain of $5 with the sell limit order or suffer a loss of $5 with the stop-loss order.

Sell Bracket Order: A sell order is bracketed by a buy stop order at a higher price and a buy limit order at a lower price.