Bracket Orders and Trailing Stop Loss – The Complete Guide

Bracket Orders and Trailing Stop Loss

Bracket Orders and Trailing Stop Loss

The Indian Trading League and SAMCO Team have consistently been telling traders – use your head in trading and in order to be a successful trader – the thing that’s most important is a trading plan and an excellent risk management system.

The most important elements of a trading plan are a well defined entry and exit strategy and a stop loss.

We at SAMCO, are introducing a unique order type in order to enable seamless execution of the above – Bracket Orders and Orders with Trailing Stop Losses.

What are Bracket Orders?

Bracket Orders are 3 Legged orders with an Initial Leg, a Stop Loss Leg and a Target Leg. These orders use “bracketing” to determine the stop loss levels of a trade and also the target exits for a trade. This order type is available only for Intraday trades.

In a Bracket Order, a trader can place 3 orders at a time:

a. Position Initiation Order (Also called the Source Order) – This will always  be a Limit Order.

b. Target Order (Also called the Square off order) – This order is always a limit order

c. Stop Loss Order (The option to select a trailing stop loss or a static stop loss order lies with the user)

In case, either of the exit orders i.e. Target Order or Stop Loss Order get executed, the other pending order shall get cancelled automatically by the system.

What are Trailing Stop Orders?

Trailing Stop Loss Orders are an extremely advantageous feature when compared to a fixed static stop loss order because they allow traders to protect their capital if the price drops.

In a Bracket Order, the stop loss leg of the order can be defined as either a fixed stop loss or a trailing stop loss. In a trailing stop loss, the system will revise and modify the stop loss trigger price based on movements in the market price. More on how to define trailing stop a little later.

Placing a Bracket Order

You can place a bracket order by following the steps as mentioned in the appended table.

Method and Commands

BUY Bracket Order

SELL Bracket Order

Market Watch

Right Click a script in the Market Watch -> Select Bracket Order -> Buy Bracket Order Right Click a script in the Market Watch -> Select Bracket Order -> Sell Bracket Order

Orders and Trades Menu in Tool bar

Select Orders and Trades in the Tool bar -> Bracket Order -> Buy Bracket Order

Select Orders and Trades in the Tool bar -> Bracket Order -> Sell Bracket Order

ShortCut Key

Shift + F3

Shift + F4

Important points to note – Order Entry Form Input Fields

  1. Initial Order Type – Can be selected as a Limit Order
  2. Disclosed Quantity – Must be more than 10% of the Quantity
  3. Target Order – Square Off Sell – Can be input on the following basis
    • LTP + Absolute – The Target Order will be input by taking the Last Traded Price for the Trades executed and add an absolute amount in rupees as defined by you. So For Instance, If the LTP is 100 and you enter a LTP + 5 (Absolute) Square Off order, then the Target Order will be set as Rs. 105
    • LTP + Ticks – The Target Order will be input by taking the Last Traded Price for the Trades executed and add the number of ticks as defined by you to determine the target order price. One Tick is Rs.0.05. Therefore 20 Ticks is equal to Re. 1. So For Instance, If the LTP is 100 and you enter a LTP + 20 (Ticks) Square Off order, then the Target Order will be set as Rs. 101
    • ATP + Absolute – The Target Order will be input by taking the Average Traded Price for the Trades executed and add an absolute amount in rupees as defined by you. So For Instance, If the ATP is 50 and you enter a LTP + 5 (Absolute) Square Off order, then the Target Order will be set as Rs. 55
    • ATP + Ticks – The Target Order will be input by taking the Average Traded Price for the Trades executed and add the number of ticks as defined by you to determine the target order price.One Tick is Rs.0.05. Therefore 20 Ticks is equal to Re. 1. So For Instance, If the ATP is 50 and you enter a LTP + 20 (Ticks) Square Off order, then the Target Order will be set as Rs. 51
  4. Stop Loss Sell Order – Can be defined exactly as above in the 4 ways.
  5. Trailing Stop Loss Check Box – In case you want to place a trailing stop and not a static stop loss – Please select the check box and Enter the trailing tick values. The Minimum Trailing Ticks are as mentioned in the table below. Please enter the ticks in the correct multiples.

Segment

Minimum Trailing Tick – Absolute

Minimum Trailing Tick – Ticks

NSE – EQ

1

20

NSE – F&O

1

20

NSE – CDS 0.05

20

MCX

1

20

Buy Bracket Order Entry Form

Buy Bracket Order Entry Form

Bracket Order

Sell Bracket Order Entry Form

Point to Note -: Target order and stop loss order are submited to the exchange, after the main order is first executed on the exchange. If the difference for the target / stop loss order falls beyond the circuit limits at the time of punching of the order, then the target / stop loss order will be placed at circuit price only since the exchange does not accept order beyond circuit limits.

Modification of Bracket Orders

  1. If the Position Initiation Order is not fully traded, you can modify the limit price of the source order.
  2. If the Position Initiation Order is fully traded, you can modify the Trigger price of the Stop Loss Order and the limit price of Target square-off order.

This can be done from the Modify Order option in the Order Book (Short cut key – F3)

Exiting Bracket Orders

  1. In case the Position Initiation Order is not traded, Exiting the Bracket Order will cancel this very source order.
  2. In case the Position Initiation Order is traded, Exiting the Bracket Order will result in modification of the Square Off Target order to a market order and the pending stop loss order shall get cancelled.

Margin Requirements for Placing Bracket Orders

The Margin Requirements for Bracket Orders will be the same as for cover orders. You can calculate the margins required to place orders in our margin calculator.

More often than not, the margin levied in Bracket orders shall be [(Trade Price – Stop Loss Price) * Quantity]. This shall be subject to a minimum margin percentage that shall be pre-defined based on the volatility of the stock.

RMS Square-Off for Bracket Orders

Bracket orders are an intraday trading product. In case the orders are not squared off prior to the stipulated cut-off time, the SAMCO RMS system shall square off the positions. The stipulated cut-off time for the different exchange segments are as follows:

  • Equities (NSE – EQ) – 3.15 pm
  • Equity Derivatives (NSE-F&O) – 3.15 pm
  • Currency Derivatives (NSE-CDS) – 4.45 pm
  • Commodity Derivatives (MCX) – 30 minutes prior to market close

Segments available

Bracket Orders are currently available only for the following segments – NSE EQ, NSE – F&O and NSE – CDS on the SAMCO Trader. You can also trade in Bracket orders these segments via Call-N-Trade.

We are India’s first discount broker to allow Bracket orders for MCX. However currently, bracket orders in the MCX can only be placed via Call-N-Trade terminals and not through the SAMCO Trader.

Billing, Brokerage and Call-N-Trade Charges – Bracket Orders

In a bracket order, every time a part of the Initial order gets executed, a corresponding stop loss and target order are placed by the system. So For Eg. If an order for 10 shares is placed which partially gets executed for 3 shares, then a corresponding stop loss and target order will get placed only for 3 shares. Subsequently, if 7 more shares get traded, then corresponding stop loss orders and target orders will get placed for 7 shares. Since multiple orders are being placed for target and stop loss, each separate order shall be considered as an order and shall be charged on a per executed order basis at Rs. 20 or 0.02% whichever is lower. Keeping the above in perspective, it may be wise to place a Bracket Order without any disclosed quantity since each time a part of the disclosed quantity is executed, multiple orders shall get generated which shall be billed separately. Call-N-Trade Charges will apply in a similar manner. Important point to note that in case, the source order is placed on a CNT terminal and is squared off by RMS at the stipulated cut-off time, then CNT charges will be applicable even for the RMS Squareoff order.

Advantages of Bracket Orders

  1. Discipline in Trading – One of the biggest advantages of Bracket orders is that it brings discipline to trading with the help of trailing stops and also fixed exit target strategy.
  2. Minimizes Margin Requirements – In usual course, every pending order input in the system requires margin to be blocked. So for example, if you put an order for 100 BUY NIFTYFUT at 8000, another order for 100 SELL NIFTYFUT at 8050 and a third stop loss leg of 100 SELL NIFTYFUT at 7950, then an approximate total margin of Rs. 192000  [Rs. 64000 (8L x 8%) X 3]  would be blocked for an NRML order and approx Rs. 76800 would be blocked for a MIS Order. However, in case of this bracket order, the margin that would be blocked in your account would be only Rs. 10,000 even though there are 3 legs of orders.
  3. Cancels the opposite leg of the order in case one leg executed – Another major advantage of Bracket Orders is that you don’t need to monitor your trades and delete a stop loss order in case target was executed and vice versa. In case of a bracket order, in case your target is achieved, the stop loss order would automatically get cancelled from the system.

Beginning Trading with Bracket Orders

In order to begin trading with bracket orders, download the latest version of the SAMCO Trader from the Downloads section of the SAMCO Website – Trading Platforms section. In case, bracket orders are not enabled in your SAMCO Trader – Please raise a ticket in the technical support department on our Support Helpdesk.

45 comments

Leave Comment
    • Jimeet Modi
      Author

      Hi VinodChandra,

      The Option is available in Web Trading. On trade.samco.in -> Go to Trade -> Place Bracket Order -> Fill out the form -> Click Submit

      You should be use BO on the web as well.

  1. vinodchandra

    Can you please also develop the Reports which gives the “Turn over” as per the Taxation Rules for a financial year.

  2. sagar tambe

    sir, will u please make this topic in other language like hindi or Marathi. I m a new trader to market and to samco. some words confused me.
    and sir I am happy to be a part of samco and itl.
    so encouraging…..

    • Jimeet Modi
      Author

      HI Atul,

      Bracket orders are not permitted for the Mobile App’s by the exchanges. We regret to inform you that you can’t trade on Bracket orders on the Mobile. Cover Orders are available on the mobile. BO’s available only on the Internet platforms & Call and Trade.

  3. Yuwi

    One Query –
    For buy bracket order,
    1) SqrOff sell price -> should be LTP + Absolute …..(looks perfect)
    2) Stoploss price -> should be LTP – Absolute..Can anybody confirm if this is correct, as nowhere this details is mentioned in above blog..Hope the application is developed in this way..It should not be LTP+absolute.

    Thanks,
    Yuwraj

  4. Ashok Bose

    U did some major mistake. For West Bengal Rs 1000, STAMP DUTY for DELIVARY ONLY For Derivative it is only Rs200, why you are taking Rs 1000 for Nifty Futures? My present brokers Zerodha & Sasonline both taking Rs 200 for Nifty Future for West Bengal.
    Please rectify your error fast. We Bengali traders want to participate in ITL.

    • Jimeet Modi
      Author

      Dear Ashok,

      The Stamp Duty for derivatives for the state of West Bengal is 0.002% only. Please check – https://www.samco.in/charge_list

      Apologies in case there was any confusion about the same. Would love to have you onboard the ITL.

      We also have something special coming up for WB! Stay Tuned in for updates! 🙂

  5. Ashok Bose

    Thanks for clarification & charges list.
    I got that wrong info about Rs 1000 stamp for NSE F&O from your brokerage calculator itself, it is still showing the wrong Stamp 0.01% for Future &Option for WB.

  6. Pankaj

    Trailing stop loss will be activated on initiation of trade, or it will be activated only after hitting target price ?

    • Jimeet Modi
      Author

      Trailing Stop Loss will be activated on the initiation of the trade itself. The trailing SL in Absolute Rupees or ticks needs to be entered at the time of the initiating the trade itself.

  7. O P Sharma

    Dear Sir,
    I may be told that whether I can convert cover order or BO, traded in FNO segment, into carry forward trade for next day square off.

    • Jimeet Modi
      Author

      In order to convert a BO order to a carryforward order, go to the position conversion window an convert to “NRML”. That shall do the needful.

  8. VISHAL MAHAJAN

    Hi,

    When we can expect to have BO available in samco trader for MCX segment. Please make it available asap.

    Regards,
    Vishal

    • Jimeet Modi
      Author

      Hi Vishal,

      We’re working with the Exchange compliance to help us introduce the BO feature in the SAMCO Trader. Hopefully soon. Will update when done.

  9. hitendra bhatia

    Hi, I am looking for opening a trading account with Samco, before that need some understanding on the CO / BO on web platform.

    Can I place the CO in web browser platform with limit price either in buy leg or sell leg or it will be in both legs.

    Can I place the BO in web browser platform with limit price either in buy leg or sell leg or it will be in both legs.

    • Jimeet Modi
      Author

      You can place the orders from the Web Browser platform.

      Cover Order – The initial leg can be a limit/market order however the stop loss leg will always be a SL-M order i.e. a Stop Loss Market Order.

      Bracket Order – The initial leg can be a limit order, target order too can be a limit order however the stop loss leg will always be a SL-M order i.e. a Stop Loss Market Order.

    • Jimeet Modi
      Author

      Bracket orders are not permitted for the Mobile App’s by the exchanges. We regret to inform you that you can’t trade on Bracket orders on the Mobile. Cover Orders are available on the mobile. BO’s available only on the Internet platforms & Call and Trade.

    • Jimeet Modi
      Author

      Bracket orders are not permitted for the Mobile App’s by the exchanges. We regret to inform you that you can’t trade on Bracket orders on the Mobile. Cover Orders are available on the mobile. BO’s available only on the Internet platforms & Call and Trade.

    • Jimeet Modi
      Author

      No. We currently offer bracket orders on commodities only via Call and Trade terminals. There are compliance restrictions on offering BO for MCX on client trading terminals.

Leave a Reply

Your email address will not be published. Required fields are marked *