Bracketed Buy Order


DEFINITION of 'Bracketed Buy Order'

A buy order that is accompanied by a sell limit order above the buy order's price and a sell stop order below the buy order's price. These three component orders will all be set at a price determined by the investor at the time the order is entered. This type of order allows investors to lock in profits with an upside movement and prevent a downside loss, without having to constantly follow the position.

BREAKING DOWN 'Bracketed Buy Order'

For example, suppose that an investor places a buy order for 100 shares of ABC at $50, along with a sell limit order at $55 and a sell stop order at $45. If the price moves up to $55 or down to $45, the position will be sold. The trader will either meet a specified gain of $5 with the sell limit or suffer a loss of $5 with the stop-loss order. However, it is important to note that having a stop-loss order at $45 doesn't mean that you are guaranteed that price. This is because once triggered, the stop loss turns into a market order and will be sold at the current market price after triggering. If the stock gaps down to $40, for example, your stop loss would be triggered and your shares would be sold for around $40.

  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches ...
  2. Limit Order

    An order placed with a brokerage to buy or sell a set number ...
  3. Market Order

    An order that an investor makes through a broker or brokerage ...
  4. Stopped Out

    The execution of a stop-loss order. Stopped out refers to when ...
  5. Sell

    The process of liquidating an asset in exchange for cash. The ...
  6. Order

    An investor's instructions to a broker or brokerage firm to purchase ...
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