Because of its strong leverage, the bracket order is one of the most popular. The bracket order is a combination of more than two orders that will be combined to form one. Let’s say you have INR 100 to spend on goods in India, and you also need to place two further orders.
The target order, also known as a profit order, will automatically book your profit if your order reaches a specified amount. For example, the limit is INR 130. If it exceeds the limit. Your order will be scheduled automatically.
If your stockbroker fails to handle your stock in any way, the third-order will assist you in withdrawing your order. For example, if you set a limit that your investment must not go below INR 95 and you are not allowed to take any further losses, your order will immediately withdraw your investment to your account.
Disadvantages of using Bracket Order
It has a number of benefits, but it also has some drawbacks. Here are some of the drawbacks:
- Has Significant Financial Risks
Many traders, especially beginners, will lose a significant amount of money. Beginners are known to deposit INR 30 lakh and lose 30%, 50%, or even 80% of their wealth in a single day owing to minor negative impacts.
- Huge holders and experts can manipulate it.
Since its inception, the bracket order has been heavily abused by senior traders or experienced investors to earn rapid money, effectively killing the careers of novice traders.
- Most digital platforms don’t have it.
Another downside of bracket orders is that they are inaccessible from the majority of trading platforms. Bracket orders are not available on popular broker apps like Zerodha and Grow.
- Brokerage Fees Are Expensive
If you place a bracket order, you’ll have to pay a lot of money in brokerage fees. For example, placing an ordinary transaction required INR 5 in brokerage, whereas placing an order in the same investment class required INR 25. This equates to approximately 5 charges.
- May Cause Technical Problems
Modifying and executing bracket orders is extremely difficult. The majority of the tile system is unresponsive, and the server is unavailable. While executing bracket orders, many traders will run into the same problem.
- It can be time-consuming and difficult.
Because a bracket order includes numerous legs, modifying it means going through each one one at a time, which takes a long time and may cause you to be late.
Is it strongly advised that beginners avoid bracket orders due to the significant risk and extensive prior knowledge required?
Frequently Asked Questions
What are the three orders of the bracket order?
The following are the three orders:
– target order for booking profit.
– original buy.
– stop-loss order for cutting losses.
Is it profitable to order brackets?
Bracket orders are not advised for novices due of the extremely complex interface. They are extremely vulnerable to loss.