Brackets are profit or loss exits you can attach to your stock or option orders when you place a trade. This can help you integrate your risk management strategy directly into the creation of an equity or option order.
Using brackets, you can predefine profit and loss targets for trades so that if those targets are met, the software will automatically send an order to exit the position.
They consist of your primary order and up to three contingent bracket orders, which if triggered, will close out the position opened by the primary order. Brackets can provide automated risk protection for your open positions regardless of whether you are logged on to the software.
To set up brackets, click the Brackets button in the Trade Ticket when entering an order in the Trade tool or Symbol Hub.
Get a demonstration and more information on using Brackets.
TIP: Brackets can also be added to orders initially opened without brackets. See Managing Brackets for instructions.
You may establish any of three types of exits:
- Profit Exit: Specifies the increase (or decrease for short orders) in value from the average fill price required to trigger the profit exit. The value can be a certain number of points (pts) or a percentage change from the execution price, or the exit price itself.
EXAMPLE If you bought a stock at $10 and wanted to exit the position at $12, you could enter 2 pts, 20%, or $12. The Est. Price label will show you what the likely result might be if the Profit Exit is triggered, but that price will be adjusted if the average fill price on your order is different.
- Trailing Stop Exit: Specifies the amount you are willing to let a stock or option price go against whatever gains it may attain. This exit is valuable in helping you retain portions of your gain in a position before closing it out. The value can be a certain number of points or a percentage of the execution price.
If you use a trailing stop exit in conjunction with a profit and/or loss exit, the trailing stop will operate between these two exits. If either of the profit or stop loss exit prices are met, the bracket will trigger regardless of any trailing stop you may have set.
EXAMPLE If you bought a stock at $10 and wanted to protect yourself should the market move against you 5% (or .5 points per share) from the execution price, the trailing stop would place an order to close your position only if the stock price loses 5% from its highest gain. The worst case scenario is that the exit order would go out at $9.50 because it simply never gained on the execution price. Conversely, the stock might not hit resistance until $14 before it drops .7 (5% of $14) and the order is triggered. If you had also set up a profit exit of 10% and a loss exit of 3% in conjunction with your trailing stop exit, the bracket would trigger at either 3% below the execution price or 10% above that price if met. This would occur regardless of your trailing stop calculation.
- Stop Loss Exit: Specifies the decrease in value (or increase for short orders) from the average fill price required to trigger the stop loss exit. The value can be a certain number of points (pts) or a percentage change from the execution price, or the stop loss price itself.
EXAMPLE If you bought a stock at $10 and wanted to try to limit losses to around 10% on the trade, you could enter 1 pt, 10%, or $9. While there is no guarantee that execution will be at or near the stop price, the Est. Price label will show you what the likely result might be if the Stop Loss Exit is triggered.
Certain aspects of the bracket exits are predefined:
- Quantity: The quantity of the bracket(s) will always be equal to the quantity filled in the primary order.
- Order quantities on brackets will not adjust due to corporate actions, including but limited to stock splits, stock dividends, spin-offs, mergers, and name changes.
- When placing an order with brackets to sell and close out a long position, if the tradable quantity of your position is less than the quantity you specify in the order, the software will send the order for the lesser amount rather than rejecting the order due to insufficient shares available to trade.
- Timing: Brackets remain active with their primary order or primary position (when the primary order fills) indefinitely, unless they are manually removed or are triggered and filled.
- Primary Venue: Bracket exits can be set up for any equity or option order that opens or adds to an existing position, regardless of the venue of the primary order.
- Hours: Bracket exits are only active during the standard session (9:30 a.m. ET to 4:00 p.m. ET)
- Bracket Venue: Bracket exits are always sent as a SmartEx Market order regardless of the primary order's routing venue.
- Trigger Value: Bracket exits trigger off the bid/ask price for both stocks and options.
- While the Est. Price is calculated off the Limit or Inside bid/ask price (for market orders), the actual exit trigger price will be based on the average fill price from the primary order. See the Bracket Examples topic to get a better understanding of brackets in action.
- Boxed Positions: Bracket exits will not function on boxed positions.
- Missing Quotes: Bracket exits placed around stocks that do not have bid/ask quotes, including Pink Sheet securities, will not activate.