Bracket Order
A combined order setup that automatically attaches both a take-profit and a stop-loss order to a position the moment it's opened, bracketing it on both sides.
A bracket order is a combined order setup that automatically attaches both a take-profit order (see Kaavon's "Take-Profit Order" glossary definition) and a stop-loss order (see Kaavon's "Stop-Loss Order" glossary definition) to a position the instant it's opened, "bracketing" the position with predefined exit points on both the upside and the downside. Once either the take-profit or the stop-loss level is reached and triggers, the other order in the bracket is typically canceled automatically, since the position has already been closed.
Bracket orders let a trader define their complete risk-and-reward plan for a trade upfront, at the moment of entry, rather than needing to separately monitor the position and manually place exit orders later. This is particularly useful for managing risk systematically and removing the temptation to deviate emotionally from a predetermined exit plan once a trade is already open and the market is moving.
Examples
- A trader opening a position with a bracket order simultaneously sets both a take-profit target and a stop-loss level, with whichever triggers first automatically canceling the other.
- Using a bracket order lets a trader define their complete exit plan at the moment of entry, reducing the temptation to deviate from it emotionally once the trade is already open.