How to use bracket orders in intraday trading strategies-techniques?

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The objective of this article is to understand why bracket orders as a trading tool is advantageous and useful. When one is involved in day trading or intraday trading, we know that apart from a good trading system we need to have extremely good trade management rules or system in place. Whatever strategies or techniques you are using; your ultimate success in intraday trading depends on how effectively you manage your risks and rewards.

I get lot of queries from my subscribers about how to pick right stocks for intraday trading, how to save time on trades wherein they aren’t able to monitor trades minute by minute. Working & Salaried people can’t seat in front of laptops/computers for whole day.

Tradvantage’s trading system takes care of one major problem that’s – scanning and picking right stocks for intraday trading with minimum effort and less time.

I have shown the method to scan through entire Nifty 50 stocks and Nifty Midcap 100 stocks in just 15-20 minutes and be ready with your stock-list for intraday trades with exact entry price, stoploss price and Targets even before the market opening.

Now in this post I am going to discuss on other problem that most of us face – how to manage your intraday trades with minimum human and emotional intervention, so that your entire trading process takes place effortlessly with minimum stress and anxiety.

Technological advancements have made trading almost an automated process.

Lot of brokers are giving options of very sophisticated and specialized order placement mechanism which can be effectively used with our intraday trading strategies/techniques – These are Bracket Orders and Cover orders.

While most of us know about Cover orders wherein we can place “limit stoploss orders simultaneously with the buy/sell order for our trades”

Let me quickly put important points related to Cover Orders:

  • In cover orders we place buy/sell order at market price, while a limit stoploss order is placed simultaneously so as to minimize the losses in case the trade goes against our desired direction.
  • In cover orders we can’t place Target price order, we have to manually observe and square-off our positions if our targets are reached. And in case our position is in profit then we have to manually increase stoploss (trail stoploss) so as to gain maximum from the trade.

So in such case bracket orders come as a most effective order placement mechanism which eliminates manual intervention and our emotions.

What are Bracket Orders?  Why & How to use them for intraday trading?

Ans:  Bracket order is a type of order placement mechanism in which you can take trading position by simultaneously placing Target price and Stoploss price.  As soon as the main order is executed the system will place two more orders (profit taking and stoploss). When one of the two orders (profit taking or stoploss) gets executed, the other order will get cancelled automatically.

Important points to remember in case of Bracket Orders:

  1. This is purely a intraday order placement system. Not applicable for delivery based trades.
  2. You can’t carry forward positions.
  3. All the bracket order positions which are open will be automatically closed by 3.20 p.m.
  4. With bracket orders we get lot of leverage (extra margin) for intraday trading since we compulsorily place Stoploss order with every trade. So we can even trade with capital of Rs.4000-8000.

Margin  & Leverage with Bracket Orders in Intraday trading:

Margin/Leverge for trading in Equity Cash:

Margin/Leverage for trading in Futures of Stocks & Indices like Nifty, BankNifty:

 

Margin/Leverage for Trading in Nifty Options:

Lot of Brokers now-a-days have facility of Bracket orders for intraday trading.

The best amongst all is Zerodha because it also provides option of placing trailing stoploss for bracket orders (explained with example in details later).

Samco and Share Khan also have option of placing bracket orders.

Let’s see how combination of our trading system (Scanning & Picking right stocks with proper entry price, stoploss price and target price) and Zerodha’s Trading platform (bracket orders) can solve almost all your trading problems.

Example: With our trading system we create a Watchlist of 7-8 stocks for intraday trades with proper entry price, stoploss price and target price.

Let’s say we have Trade set up for Reliance Industries as : Entry Price: 1300, Stoploss: 1295 and Target Price : 1310.

We place Bracket order as: Buy at 1300, Stoploss at 1296 and Target at 1310, Trailing stoploss is optional. But if we Put trailing stoploss we would be able to trade till maximum movement in the stock while conserving our previous profit.

Benefit of Bracket orders with Trailing Stoploss:

Let’s say we buy at 1300 with stoploss at 1296 and Trailing stoploss as 2. That means for every 2 point movement of stock in our desired direction the Stoploss will trail automatically (in this case move up) by 2 points.

Stock price moves to 1302 –   Stoploss moves to 1298

Stock price moves to 1304  – Stoploss moves  to 1300 (our buying price)

Stock price moves to 1306 –  Stoploss moves to 1302

Stock price moves to 1308 – Stoploss moves to 1304

Stock price moves to 1310 – Stoploss moves to 1306.

Case 1 : If Stocks price falls from here to 1306, our stoploss order gets triggered and postion gets squared-off at 1306, so we make Profit of 6 points.

Case 2: Stock price moves to 1308 and then again starts uptrend and moves to say 1320, then our stoploss also moves till 1316, we don’t know how far the stock will move but with automated trailing stoploss we are able to capture maximum movement without losing our previous profits.

Watch Video demonstration of how quickly bracket orders can be placed:

In nutshell, Bracket orders removes human intervention during trades, no emotions at play. It automatically brings discipline to your intraday trades.

Moreover you can place Bracket orders with trailing stoploss on your smartphones or tablets too. So it is very effective and beneficial mechanism for salaried, working people, business owners and even college students.

Prepare a watchlist of stocks in the night itself, add it to your trading App, next day check during market hours which ever stocks have reached your entry prices as per your watchlist. Take positions with Bracket orders, place trailing stoploss. In between your work whenever you get time check the positions on smartphone.

How much more simplification do we need for our trades!

There is no reason or excuses for not trying out trading for systematic wealth creation in this digital age.

System, technology, processes all are in place. One just need to start using it.

We check WhatsApp, Facebook on our smartphone number of times all through the day while working, why can’t we have a sophisticated trading app on our smartphone and make use of it to make some good money?

Where there is a Will, there is a Way – If you are willing to put a bit of extra effort to learn these simple intraday trading strategies/techniques then you are sure to find a good way to make money in your busy working schedule too.

Happy Learning & Earning!

Queries/comments are welcomed. Please share in the comment box below.

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