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BRACKET ORDER EXPLAINED

BRACKET ORDER EXPLAINED

Every profitable trader looks to maximize gains while cutting losses. It is a fairly common knowledge that trading in financial markets always involves some amount of risk. What if we told you that you can control risk and also be away from the trading terminal?

Yes! You heard that right!

Wouldn’t it be nice if you can automate all your trades? And not be glued to your screen like your grandma watching her favorite soaps on TV?

Yes? So let’s begin.

 

What is a Bracket Order?

A Bracket Order is an advanced intraday order that is accompanied by a compulsory Target and Stop Loss Order. In simple words, this resembles a bracket which helps traders automate their trades. A Bracket Order offers high leverage and is available in Equity Cash, Equity F&O, Commodity F&O and Currency F&O segments. It is a type of order where you can enter a new position along with a target/exit and a stop loss order. Hence, the order itself contains 3 orders embedded in it

  • Limit Order
  • Take Profit Limit Order
  • Stop Loss Order or Trailing Stop Loss (optional)

This is used by traders to take advantage of high margin exposure while keeping complete control of the risks involved.

 

How does a Bracket Order work?

When a Bracket Order is placed, the system will first execute the Limit order. Until the Limit Order is triggered the ‘Take Profit Order’ and ‘Stop-Loss order’ does not get activated. Let’s consider a few scenarios to understand this better.

Scenario 1: Limit Order not executed

If the Limit Order is not executed by 3:15 pm, then the system will automatically cancel your order.

Scenario 2: Limit Order executed, Stop Loss and Take Profit remain pending

When the Limit order is executed, the Stop Loss and Take Profit Orders get activated. If the price does not reach the Stop Loss or Take Profit levels, they will remain pending. If these orders remain pending till 3:15 pm, then the system will automatically convert the Bracket Order to Buy/Sell order and close the trade at the current market price of 3:15 pm.

Scenario 3: Limit Order executed, Take Profit order executed

When the Limit Order is executed, the Stop Loss and Take Profit orders get activated, If the price moves and hits the Take Profit level, the Take Profit order gets executed. When this happens, the position will automatically be squared off and you will book profits. In this case, the Stop Loss order gets canceled.

Scenario 4: Limit Order executed, Stop Loss order executed

When the Limit Order is executed, the Stop Loss and Take Profit orders get activated. If the price moves towards the Stop Loss level and touches it, the Stop Loss order gets executed following which, the position will automatically be squared off and you will book losses. Consequently, in this case, the Take Profit order gets canceled.

 

Yes, we know how elaborate that was, but hey, we don’t mind explaining.

Time for a story!

Our budding trader wishes to buy TATA at Rs.1000 and wants to book profits at Rs.1050. However, he is a little skeptical that it might go down a lot if the price reaches below Rs.990. Under normal circumstances, he/she would have placed

  • A buy Limit order at Rs.1000
  • A Take Profit Order at Rs.1050
  • A Stop Loss Order at Rs.990

After placing the above orders, our budding trader sits in front of his PC to monitor his trades to ensure that whenever any of the sell orders is triggered he cancels the other orders. Because if he does not, there is a possibility of all 3 orders getting executed, and that would be disastrous!

With a Bracket Order, our budding trader can place all the above orders at once and also without having the need to monitor the price. All he has to do is place a Bracket Order, with a Limit Order of Rs.1000, a target price of Rs.1050 and a Stop Loss Order of Rs.990 and sit back to watch the magic happen. Easy peasy!

 

Bracket Orders can be either Buy (Long) or Sell (Short) orders.

Buy and Sell Bracket Order

A Long Bracket Order is placed when you want to benefit from the upward movement in price, in other words, when you want to buy low and sell high. In a scenario like this, the Stop Loss Order will be lower than your Limit Order. This is done to protect yourself from any unexpected downward movement. For example, if your Limit Order is placed at Rs.1000, your Stop Loss Sell Order will be at around Rs.900 or less. Whereas, your Take Profit order will be around Rs.1300 or higher

A Short Bracket Order is placed when you want to benefit from the downward movement in price, in other words, when you want to sell high and buy low. In such a scenario, the Stop Loss Order will be higher than your Limit Order. This is done to protect yourself from any unexpected upward movement since your trade is place against price appreciation. For example, if your Limit Order is placed at Rs.1000, your Stop Loss Buy Order will be at around Rs.1100 or more, while your Take Profit order will stand at around Rs.700 or lesser.

 

Trailing Stop Loss Feature

Trailing Stop loss In Bracket Order

A Bracket Order also includes an optional Trailing Stop Loss feature. In this feature, your Stop loss trails favorable current market price to protect you further from potential losses.

Referring the example above, for a Buy order, if the price moves up by Rs.50, to Rs.1050, then the new Stop Loss would be adjusted to Rs.1020 (990 + 50) since this stop-loss price trails favorable market price and gets adjusted accordingly. The adjusted price is calculated by adding the difference between the highest price post limit order execution (1050) – the initial limit order price (1000) = Rs.50. However, if the price moves down from Rs.1050, the Stop Loss level at Rs.1020 will remain the same. This is how Trailing Stop Loss benefits traders. That’s pretty cool, don’t you think?

 

Uses and features of Bracket Order

  • Controlled Losses - Bracket Orders can literally be a life-saver for a lot of traders. A trader that places an order without a stop loss is at the risk of losing a substantial portion of his/her capital. Since a Bracket Order accompanies a compulsory stop loss order, you are less likely to lose track of your losses and while also controlling them.
  • Automate your trade - Since Bracket orders are automated, trading in the markets becomes a lot more efficient. Your trades will automatically close once the profit or loss targets are met, with or without your presence in front of the trading terminal, saving you a lot of time and effort.

 

Margin Calculation for Bracket Orders

Bracket order positions generally carry lower margin requirement due to the Stop Loss Order placed simultaneously. So the required margin will depend on the Stop Loss price entered. As a rule of thumb, lower margins for lower stop loss, while higher margin for higher stop loss.

Index Price Quantity Contract value Exchange Specified Margin Stop Loss Price Margin Required
Nifty 11560 75 8,67,000 69,550 11,510 12,720
Nifty 11560 75 8,67,000 69,550 11,485 14,959

Note: TradeJini offers up to 5x margin of the exchange provided margin for intraday orders. If a trader wants to carry the trade to the next day, he/she must fulfill the exchange provided margin.

 

How to Place the Bracket Order

Option 1 - From the Menu bar

Open Nest Trader → select “Order and Trades” tab → select “Bracket Order” → select either (Buy / Sell) order → enter details → click “Submit”.

Place Buy Bracket Order

Option 2 - Using Shortcut Keys

Open Nest Trader → Select “Script” from market watch

  • Press the shortcut key “SHIFT + F3” for a buy Bracket order → Enter details → Click “Submit”.
  • Press the shortcut key “SHIFT + F4” for a sell Bracket order → Enter details → Click “Submit”.

Place Sell Bracket Order

There are two ways you can set your target and stop-loss using bracket order. You can either enter absolute values or, you can also use ticks where, 1 Tick = 5 paise, so 20 ticks represents 5 x 20 = Rs.1.

 

Modifying and Exiting a Bracket Order

For a Bracket Order that is pending (Limit Order not executed), you will be able to able to modify all 3 legs of the Bracket Order. This means, for a pending Bracket Order, you can modify Limit Order price, Stop Loss level and Take Profit level.

However, once the Bracket Order is executed (Limit Order being executed), you will not be able to modify the Limit Order price since it has already been triggered. But in this case, you will be able to modify Stop Loss and Take Profit levels.

If you wish to exit a Bracket Order, the system will square off the order at the current market price while also canceling the Take Profit and Stop Loss order.

To Modify or exit a Bracket Order, you can use either the shortcut key (F3) to open Order Book or click on “View Orders and Trades” button on the menu bar → Select “Order Book”.

Place Buy & Sell Bracket Order

 

Noteworthy points about Bracket Orders

  • Since all Bracket Orders are Intraday orders by default, the orders will be squared off automatically at
    • 3:15 pm for NSE Equity & NSE F&O
    • 4:45 pm for NSE Currency
    • 11:30 pm for MCX Commodity
  • Bracket order is currently enabled for Equity Cash, Equity F&O, Commodity F&O and Currency F&O segments.
  • During pre-market hours(9:00 am - 9:15 am), Bracket orders can be placed for Equity Cash. During post-market hours (3:40 pm - 4:00 pm), Bracket Orders can be placed for Equity Cash and Equity F&O.
  • Bracket Order has an optional Trailing Stop Loss feature that dynamically adjusts your stop loss price according to market price movements.
  • Bracket Orders are currently valid only for derivative based scripts in Equity Cash.

23 Comments

  1. Can I Log out Nest Trader after placing Bracket orders or it need continuous internet connectivity ?

    Reply
    • You can logout after placing the order. No need for internet connectivity after placing the order.

      Reply
  2. can this bracket order also be placed for the following scenarios
    scenario 1 –
    1st leg – Buy using Stoploss limit order
    2nd leg – Profit taking using Sell limit order
    3rd leg – Stoploss order for the 1st Buy leg stop loss order
    Scenario 2 –
    1st leg – Sell using Stoploss limit order
    2nd leg – Profit taking using Buy limit order
    3rd leg – Stoploss order for the 1st Sell leg as stop loss order

    Reply
    • Bracket Orders cannot be placed for both the above Scenarios

      Reply
  3. In bracket order mode, how are the brokerage calculated? For example, If i place order of 100 Reliance at Rs.1000 and Target order triggered at 1015 (and SL order auto-cancelled).. What will be my brokerage? Pls explain in detail.

    Reply
    • Bracket Order is an Intraday Order, so the brokerage will be identical to the Intraday Brokerage of 0.01% or Rs. 20/ Order whichever is lower for Equity Intraday.
      Your Example of Reliance for 100 Quantity at Purchase price Rs. 1000 & Sell/Target price Rs. 1015 will have a brokerage of Rs. 20.15.
      Please visit the brokerage calculator for detail information Brokerage Calculator

      Note* The above brokerage holds good if the order gets executed in one tranche. but In case if the initial order gets executed in multiple tranches their will be multiple targets orders placed at the same target price.

      Reply
  4. In Bracket order, Can we revise Stoploss upward once the stock moves higher after buying?

    Reply
    • Yes, you can revise Stoploss.

      Reply
  5. do u provide bracket order for mcx

    Reply
    • YES, we provide Bracket Order for MCX

      Reply
  6. Is hedging in MCX Commodity using bracket order possible.
    For example.

    First oder i place buy bracket order at 3120 with stop loss at 3110 and profit target as 3135

    second order i place sell bracket order at 3120 with stop loss at 3130 and profit target as 3105

    Hedging concept possible or not with Bracket order with TradeJini.Please advise.

    Reply
    • Bracket orders allows traders to limit their losses and achieve their target profit. An individual can opt to use Bracket Order for any trading strategy. Hedging, speculation & arbitrage anything can be applicable based on strategy of the client.

      Reply
  7. Suppose BankNifty is trading @25000 and Call option price is @100. If I want to short this call BankNifty option using Bracket order (intraday).
    What will be the margin requirement?
    How much leverage will I get?

    Reply
    • Hello Harsh

      Not exact to your example but would point out the margin requirement for shorting Bank nifty @26000 with call option price Rs.136 and stop loss of Rs.50. The Exchange specified margin for this would be Rs.57000 and the leverage provided by us would be 3.5X which means you will have to maintain Rs.16000. Please note based on stop loss the margin requirements changes, a narrow stop loss would mean higher leverage resulting to low margin requirement.

      Reply
  8. IN Bracket order where to put take profit order ?

    Reply
    • Brack Order

      I hope the image provides a better understanding of Brack Order Dialog Box.

      Reply
  9. What is the min value of trailing stoploss in bracket order in equity intraday

    Reply
    • The minimum value for a stop-loss or trailing stop-loss in bracket order or any other order depends on the tick size of a script. Tick size is an indicator representing the minimum movement of a script. Each script has it’s own tick size. So based on a scripts tick size we can determine the minimum value to be entered.

      The tick size of a script can be found in NEST trader Desktop app with “SHFT + F7”.

      Reply
  10. How much margin we need to maintain to place the bracket order for Bajaj finance?

    Reply
    • The margin required for a bracket Order depends on the Stop Loss placed.
      A buy of Bajaj Finance at Rs.2,705 with a stop loss of Rs.50 the margin required is Rs.53,577.
      A sell of Bajaj Finance at Rs.2,695 with a stop loss of Rs.50 the margin required is Rs.53,476.

      Reply
  11. Hi,
    Could you please share the intraday margin required script wise for NSE FNO, cash and mcx segments for bracket order … I could see only mis leverage in the margin calculator

    Reply
    • Hi Ashwin,
      We have sent you a mail. Please revert back.

      Reply
  12. Hi Ashwin,
    We have sent you a mail. Please revert back.

    Reply

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