DEFINITION of 'Bracketed Sell Order'

A sell order on a short sale that is accompanied (or "bracketed") by a buy stop order above the entry price of the sell order and a buy limit order below the entry price of the sell order. As the three component orders are based on set prices, this type of order protects the investor from the downside but also potentially locks in a gain without the investor constantly monitoring price.

BREAKING DOWN 'Bracketed Sell Order'

For example, say an investor enters a short position in ABC stock. To enter a bracketed sell order, he or she enters the sell order at $30 - which is the entry price - and adds a buy stop order at $35 and a buy limit order at $25. Depending on the price movement the investor will either gain $5 or set his or her maximum loss at $5.

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    Learn how a limit order is placed, the types of stocks it is most useful for and the specifications placed with it to suit ... Read Answer >>
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