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. Order

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

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