Short answer: A bracket order is a set of three linked orders placed together: an entry order that opens a position, a profit-target order, and a stop-loss order. The two exit orders sit on the opposite side of the entry and bracket the entry price, one above and one below. Only one exit executes. When one is triggered, the other is cancelled.
Last reviewed: 3 November 2026
At a glance
| Part | Role | Position relative to a buy entry |
|---|---|---|
| Entry order | Opens the position | Buy |
| Profit-target order | Locks in profit by selling at a set price | Sell, above the entry price |
| Stop-loss order | Limits losses by selling at a set price | Sell, below the entry price |
| Target is hit | The stop-loss is cancelled | Only one exit executes |
| Stop-loss is hit | The target is cancelled | Only one exit executes |
What are the three orders in a bracket order?
The entry order is the first order, and it starts the trade. In a bracket order, the entry can be a buy or a sell. Its job is simply to open the position.
The other two orders are exits. A profit-target order is an instruction to sell the position at a set price, which locks in a gain if the price rises that far. A stop-loss order is an instruction to sell automatically at a set price, which caps the loss if the price falls.
Placing all three together means the exit plan exists before the trade is even opened.
Where do the exit prices sit?
The exits always sit on the opposite side of the entry. If you enter by buying, both exits are sells. If you enter by selling, both exits are buys.
For a buy entry, the profit target is set above the entry price and the stop-loss is set below it. For a sell entry, the arrangement reverses: the profit target is below the entry and the stop-loss is above it. The two exits therefore bracket the entry, and that is where the name comes from.
How does one exit cancel the other?
Only one of the two exit orders is ever executed. If the price reaches the profit target first, the sale happens there and the stop-loss is cancelled. If the price reaches the stop-loss first, that sale happens and the target is cancelled.
This matters because it means the two exits cannot both sell the same shares. It also means that once the position closes, no leftover exit order remains active.
A hypothetical worked example
The figures below are invented for illustration and are not based on any real stock or market price.
Suppose you buy 10 shares at ₹100 each, with a profit target of ₹110 and a stop-loss of ₹95.
If the price reaches ₹110, the target sells 10 shares for ₹1,100. The gain before charges is 10 × ₹10 = ₹100, and the stop-loss is cancelled.
If the price falls to ₹95 instead, the stop-loss sells 10 shares for ₹950. The loss before charges is 10 × ₹5 = ₹50, and the target is cancelled.
In both cases, the outcome was fixed by the prices you chose when placing the order. The example ignores brokerage and other charges, which would reduce both results.
Why do traders use bracket orders?
Bracket orders automate the exit side of a trade. You do not need to watch the market constantly, because the target and stop-loss will trigger on their own if their prices are reached.
They also help you stick to a plan you set in advance. The decision about where to exit is made before the trade, not in the middle of price swings when emotions may run high.
What are the catches?
A bracket order does not decide whether a trade is a good idea. The entry price, target and stop-loss are all numbers you choose, and a poorly chosen stop-loss can close a position at a loss over a small price move, while a distant target may never be reached.
The exit prices also do not move on their own. If the market moves in a way that neither exit is reached, both orders stay in place and the position remains open until one of them triggers. Automation removes the need to monitor, but it does not remove the risk of the trade itself.
Finally, whether a particular trading platform offers bracket orders varies, so check what your platform provides and how it handles these orders before relying on one.
Frequently asked questions
Is a bracket order the same as a stop-loss order?
No. A stop-loss order is one of the three parts of a bracket order. A bracket order also includes the entry order and a profit-target order, placed together as a linked set.
Can a bracket order be used to sell first?
Yes. If the entry is a sell, both exit orders are buys, with the profit target below the entry price and the stop-loss above it.
Does a bracket order guarantee a profit?
No. It sets a price at which the position will be sold for a gain and a price at which it will be sold to limit a loss. The outcome still depends on the prices you choose and what the market does.
Does a bracket order mean I do not need to watch the market?
It means you do not need to monitor constantly, because the exits trigger automatically at their set prices. The position still carries risk while it is open, and the exits only act when their prices are reached.
Sources and last check
Facts in this article were checked against the sources below on 3 November 2026. Rules and figures can change; check the primary source before acting.
- groww.in (broker education)
- dhan.co (broker education)
- icicidirect.com (broker education)
- kotakneo.com (broker education)
This article is general information, not investment advice. MyFinanceBandhu is not a SEBI-registered investment adviser.
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