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Bracket Orders
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Bracket orders are designed to help limit your loss and lock in a profit by "bracketing" an order with two opposite-side orders. A BUY order is bracketed by a high-side sell limit order and a low-side sell stop order. A SELL order is bracketed by a high-side buy stop order and a low side buy limit order. The order quantity for the high and low side bracket orders matches the original order quantity. By default, the bracket order is offset from the current price by 1.0. This offset amount can be changed on the order line for a specific order, or modified at the default level for an instrument, contract or strategy using the Order Presets feature in Global Configuration. |
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For this example, we use a very wide spread to help illustrate the functionality.
Create a limit order to buy 100 shares of XYZ, which is currently trading at 83.99 - 84.01. Set the buy limit price to $83.87. Next, instruct TWS to attach a bracket order by right-clicking the market data line and selecting Attach, then Bracket Orders. TWS automatically creates two new sell-side orders; a 100-share sell limit order at $84.87 which is the original limit price plus a one dollar offset, which you set in the Configure Order Defaults window, and a 100-share sell stop order with a stop trigger of $82.87, which is the original limit price minus the one dollar offset.
Now let’s look at how this might play out. Imagine that after transmitting the original, or parent, order, it fills at $83.86, a penny below the limit price. The execution of the parent order is the signal for TWS to submit both child orders. In scenario one, the price of the stock rises, and eventually hits the sell limit price of $84.87. The order fills at a profit of $1.00/share, not including commissions. The other side of the bracket, the stop child order, is then automatically cancelled.
In scenario two, the price of the stock falls. When it hits the stop trigger of $82.87, a market order is submitted, and the child limit order is cancelled.
Any stock or option symbols displayed are for illustrative purposes only and are not intended to portray a recommendation.