Are buy and sell bracket orders offered at TD Ameritrade, Etrade, Charles Schwab, Fidelity, Firstrade and Robinhood?

Bracket Orders Explained

If you’ve heard about bracket orders, or even if you haven’t and are curious to see how they could enhance your trading style, then you should read this article. We’ll offer an overview of what bracket orders are and when they are ideal to use.

What Are Bracket Orders?

As the name implies, a bracket order in the world of stocks is where you have a primary order which is then sandwiched or bracketed in between two additional orders in the opposite direction. For example, if you are buying a stock you would place your primary order to buy the stock at whatever price you want, and at the same time you would create two additional orders to sell the same number of shares at different price points. One would be a limit order to sell at a higher price point than your buy price and the other would be a stop loss order to sell with a stop/trigger price below your buy price.

Why Do Traders Use Bracket Orders?

A series of bracket orders where the primary order is a buy, as in the example we just described, is used to both lock in potential profits as well as to limit potential losses. Once your buy order is filled, if the price moves up and hits your limit price on the sell order, it will execute and lock in your profit. If the price goes down after your buy is executed and reaches your stop price, then that order will execute, locking in a loss at the price you chose, but also protecting you from any additional losses.

A Bracketed Buy Order with TD Ameritrade

As an example, let’s look at the three screenshot below of a bracket order we placed in TD Ameritrade’s Thinkorswim platform. Our bracket order consists of the initial market buy order for 100 shares of TSLA, which is currently trading at around $228/share. The two side orders that complete the bracket are a limit sell order with a limit price $10 above my purchase price and a stop sell order with an activation price $2 below my purchase price. This will allow me to automatically lock in a $1,000 gain if the price moves up $10 while also capping my loss at $200 if the price happens to move down instead.


TD Ameritrade Bracket Order


Open TD Ameritrade Account


Open TD Ameritrade Account

A Bracketed Sell Order with Firstrade

Bracketed orders can also be used where the primary order is an order to short sell a security and the two side orders are to close or buy back the shorted shares. In this case, you would set a limit order to buy back or close the short position at a price below the initial sell price, locking in the difference as your gain, and you would create a stop order to buy back the shares at a price above your sell price to close out the position and prevent further losses if the price moves up, against you.


FirstTrade ACAT Transfer


You can see in the screenshots below how we created a bracketed order to sell short 100 shares of Chipotle (CMG) with Firstrade. The first image is our initial order to sell short 100 shares at the current bid price of $277. The second “buy to cover” order will close our position at $720/share locking in $5,700 of gains if and when the price goes that low. And our third order will protect us from losing too much by closing out our short position if the price moves up to $790/share, capping our loss at $1,300 for this trade.

Open Firstrade Account


Open Firstrade Account


Firstrade


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