Bracketed Buy Order Definition & Trading Example
Bracketed Buy Order Definition
A bracketed buy order is when three orders are placed simultaneously in order to take on a long position. There are three components of a bracketed buy order:
- Initial Long Position
- Limit Sell Order
- Stop Market Loss Order
Why Use A Bracketed Buy Order
Traders like this trading style, because the investor knows exactly where they are looking to lock in profits as well as protect against losses. Thus removing a lot of the guess work and uncertainty associated with trading.
Bracketed Buy Order Trading Example
In the below trading example a trader entered a bracketed buy order at $24.17 for Bank of America. The trader then places a stop market order below the October 10th, low and a sell order at the first gap down at $34.