Bracket order is one of the most popular orders because of its very high leverage. It is the combo of more than two orders which will be put together to form one, called bracket order. Let’s assume if you put INR 100 to buy stock in India, along with that you also require to buy two more orders.
The primary one is the target order or the profit order, it will automatically book your profit if your order will reach a certain level. Like the limit is INR 130. If it is above the limit. Your order will automatically be booked.
If your stockbroker doesn’t handle your stock in any case, then the third-order will help you to withdraw your order, like if you set a limit that if your investment lessens to INR 95 and you are not supposed to take more loss then your order will automatically withdraw your investment to your account.
Disadvantages of using Bracket Order
Along with several advantages, it comes with some disadvantages also, following are some of its demerits:
- Comes With Huge Financial Risks
Many traders, especially beginners, will lose a lot of capital. It is observed that beginners will invest INR 30 Lakh and due to slight adverse effects, they have chances to lose about 30%, 50%, and even 80% of their capital within a single day.
- It Can Be Manipulated By Large Holders And Experts
Since the bracket order was introduced, it is heavily misused by senior traders or experienced investors to make quick money and kills the career of beginner traders.
- Not Available On Most Digital Platforms
Another disadvantage of bracket orders is that they can’t be placed from most of the trading options. Famous broker applications like Zerodha and Grow don’t offer bracket orders.
- Carries High Brokerage Charges
One who places a bracket order will need to pay high brokerage charges. For example, the ordinary order required brokerage of INR 5 for your investment, in the same investment bracket order you need INR 25 to place an order. That means about 5× charges.
- Might Lead To Technical Issues
It is very difficult to modify and execute bracket orders. Most of the tile system doesn’t respond and the server is down. Many traders will face the same issue while executing bracket orders.
- Can Be Time Consuming And Complex
Bracket order has several legs and if you wanted to modify your order you need to go one by one which requires a lot of time, you might be getting late due to the time consumed.
Is it highly recommended for beginners to stay away from bracket orders because of high risk and it requires a lot of prior knowledge?
Frequently Asked Questions
What are the three orders of the bracket order?
The three orders include:
– target order for booking profit.
– original buy.
– stop-loss order for cutting losses.
Is it profitable to order brackets?
Due to the highly complex interface, for beginners, it is recommended to stay away from bracket orders. They have a high risk of loss.