In volatility market how bracket order will work ?
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Don’t really see any disadvantages, it is an added tool for an intraday trader, and it all depends on a trader on how he uses it.
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There are several advantages.
- When your target is executed, your stop loss gets automatically canceled. No manual intervention is required. Vice versa is true. If price hits Stop Loss, your target automatically gets canceled. In normal order sometimes you may forget to cancel your Stop Loss and that might get executed as a separate order, without your attention. And will get squared off in evening at whatever price it gets.
- You are able to fix target and SL in single order.
- Your entry is possible through limit order and this avoids slippage.
- You have trialing SL option which is good if price moves in favourable direction.
- You are allowed modification of Traget, SL etc., except Trialing SL value, I think. So you can customize as per your choice even after submitting the order.
- All quantity will get executed since it is a market order during exit.
- Since you will not know the exact price of execution (in case of market order entry) you are given option to mention Target and SL in absolute points, So there is no way you could make mistakes in trigger values, since you are not manually typing the prices. Ex.
Target = Executed Entry Price + 10 absolute points
Stop Loss = Executed Entry Price – 4 absolute points
Trialing SL = 2 absolute point
Disadvantages are the way how you look at it.
- Limit orders are not possible during exit. Executed exit price will be market price and can slightly move up or down and form a slippage from your assumption.
- Entry through Stop Loss trigger is not allowed so you have to submit the Bracket Order at exactly the right moment.
- Order cancellation is not possible, you need to close your position once you have entered.
- You need to be logged in while your target or SL order executes, it seems. In cover order you can do your routine job without worrying, since you have already set the stop loss and that will execute even if you are logged off.
- It is possible that Bracket Orders execute as multiple chunks of small quanities charging you with higher brokerage. Example you order 10 lots of Nifty, if it gets executed as 3+3+2+2, then you need to pay 20+20+20+20 as brokerage instead of flat 20 rs for 10 lots as in cover orders.
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Its only a disadvantage for majority traders as they allow only Limit orders.
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SL price is not able to modify in Kite (i am facing this problem in currency futures, i wrote about it here in this forum, to support team and to Mr.Nitin via PM also bit no one has clues) while SL order modification works fine Pi (even for currency futures) so i guess, the problem is with Kite. Other than this software issue; i found only one problem with BOs, BO 's are not convertible to CNC like MIS can.
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i don’t use bracket order, but i guess there is a flaw attached to it, which is that internet must be constantly connected, or the bracket order will not be sent to the echange. this is what i was told by a friend. pl confirm if i am right?
I dont know whether it has been implemented to work when we logoff.
I think, it is not implemented.
If Nithin/Hanan answers, it would be better.
These are the comments from Hanan on Bracket Order blog from zconnect.
Hanan
You need to be logged in to ZT for the algo to work because there are dependent orders for your original order. And every time a SL is modified, a new order is sent from your system to the exchange. This is just the way the BO order system works right now. We’re in talks with our developers to allow Target/SL orders to remain in the system even if you logout, but this won’t happen in a hurry.
Hanan
BO gives you an Entry, Target and SL option, with the ability to trail your SL – all in just one order window.
CO gives you an Entry and SL option – you can modify your SL.
The main advantage of CO over BO is that you can place a CO, switch off your system and go for a picnic if you like. For BO to work, you need to always be logged into ZT.
prime intention of a bracket is that our order is protected, so incase power goes off or internet disconnects or anything of this sort happens, mentally we are calm because we know that our order is protected. but sadly, thats not the case with this bracket. apart from this, i don’t see any other reason that too for a day trader to use bracket.
@karunakumari
The problem is Cover Orders work great, so we can use cover orders instead of Bracket orders, but the problem with cover order is that we cannot modify SL into profit zone when the price moves in our favorable direction. Hanan said, we cannot modify the SL value above our buy price, we can only set it below our buy price, i.e. in the loss zone. I dont know why such rule is applied. If they allow to modify SL into profit zone, CO are better and we can logoff and leave without worrying.
@aastroguru, i personally don’t like CO because all orders are market. if someone trades really small, all these issues can be overlooked. the main trouble is when u start to trade big. if all orders are executed at market, i’d never be profitable. i am not using bracket nor CO, just restricting to basic orders. i guess that suits me best 
@karuna,
I checked that Cover Orders stop loss value can be modified into profit zone without any hiccups. Hanan’s post might be old, I think. In this case Cover Orders are better than Bracket orders, since they work even when we log off.
I guess CO SL you can change within prescribed limits only. You can not cancel the SL order and have to exit only at market price, so you can not place different order for target like BO but to exit ur position at market price.
Btw, BO’s n CO’s works fine in Pi as well as kite even if you are signed off from your account.
A note on the disadvantages :
a. You don’t need to exit at market price if you don’t want to. Modification is possible.
b. Stoploss trigger entry isn’t allowed, but you’re still entring through limit, so you are still entering at a price of your choice.
c. Since the order allows higher leverage, it is obvious you’ll be asked to exit the position rather than just cancelling target and SL orders. That is just risk management.
d. Where did you hear that you need to be logged in for your target or stoploss to be executed? That completely defeats the purpose of a bracket order. I generally place the order in the morning and just forget about it. Works fine.
e. With Zerodha, brokerage is charged per order, and not per trade, so even if your order is executed in multiple trades, brokerage is charged only for the order you placed, which in this case is just 1. Only, if the entry order is executed in multiple trades, SL and target orders will be placed separately for each trade and billed per executed order.
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Hey, cover order also can split into multiple quantities right?
Then brokerage is 20x split number/no of trades excecuted
Bracket orders is a nice tool for intraday traders with main advantages being the Stop loss and the Target order being executed in a One cancels the Other fashion as this would prevent many false entry just because a trader forgot to manually cancel one of those orders themselves.
Secondly the margin required to take a position with BO is half the margin required in MIS which is just awesome.
Third it actually forces you to be aware of the amount of Rupees at risk because you have to enter the offset and not the actual price in the Stop loss and target input box. This alone makes Risk Management all the more effective.
The only disadvantage that i see is the inability to exit a position partially having a runner in the market. Right now the position have to exited all at once which works neatly in scalps but would be a disadvantage for a trader who is thinking about swinging the remainder of their position.
It is just a trap/shame. It will be create multiple trades per order. Users should know, in BO charges are per trade not per order. I learned the hard way. Made 750/-, and next day I got 68/-. The rest is eaten.
Is the bracket order for only intraday trading? Is it possible use it as standing instructions to sell automatically when the price reached at certain level?
regards.
It’s used only for intraday. If you want to exit if price reach certain level then u can set a Stop Loss order which will execute only when your trigger price is reached.
it’s only for Intraday in Zerodha