Bracket Order and Trailing Stoploss explained

Bracket and Trailing Stoploss are very popular order types available on International trading platforms and presently privy to only select HNI’s and Institutions in India. These two order types can help improve the profitability of an Intraday Trader.

Bracket Order

A type of order where you can enter a new position along with a target/exit and a stoploss order. As soon as the main order is executed the system will place two more orders (profit taking and stoploss). When one of the two orders (profit taking or stoploss) gets executed, the other order will get cancelled automatically.

Trailing Stoploss

When you place a bracket order, you get an option to either place a fixed stoploss order, or also an ability to trail your stoploss. What this would mean is that if the contract/stock moves in your direction by a particular number of ticks, the stop loss will go up/down based on if you are long or short automatically.

A tick is the minimum a particular stock/contract can move. So 1 tick on Nifty is 0.05

bracket orderFlow while placing a Bracket order

Step 1:

Place a limit order to buy/sell to enter a position, note that there is only limit order, and if you intend to buy/sell at market, place an order with higher/lower limit price respectively. 

Step 2:

Place a Target/Square off by choosing either Ticks or Absolute

  • Ticks, 1 Tick = 0.05 for Nifty, so 20 ticks means 1 point on Nifty, 200 ticks is 10 points on Nifty
  • Absolute, If you click on this option, you mention your target based on how many absolute points, 1 point = 20 ticks Rs, so if you mention 10, it will mean 10 points profit on Nifty, and similarly if you mention 20 it will mean 20 points profit.

Step 3:

Place a fixed stoploss order by choosing either Ticks or Absolute as explained above. So if you want a 10 point stop mention 200 ticks or 10 if you click on absolute.

Step 4:

Instead of having a fixed stop loss, if you want the stop loss to trail, that is automatically go up/down when the contract moves in your direction, click on trailing SL and along with the SL mention trailing ticks in either ticks or absolute. Trailing ticks will be the movement of the contract/stock for which the SL will change. So if you have 2 points as a trail, as and when the contract/stock moves in your direction by 2 points, the stoploss price also will get increased/reduced based on if you are long or short respectively.

An added benefit is that since a compulsory stop loss has to be mentioned while placing an order, the risk is limited and hence the brokerages will typically give higher leverage for your intraday positions if using a Bracket Order.