A Bracketed Buy Order lets an investor put rules on their share purchase in the form of a buy order, a sell limit order, and a sell stop order.
The benefit is that the investor can limit their loss. The downside is that the investor also limits their gain.
For instance, say you want to buy a stock for $20, with a sell limit order at $25 and a sell stop order at $15. If the price of that share moves up to $25 or down to $15, the share is sold automatically. The nice thing about this arrangement is that an investor can specify how much they want to spend and how much they're willing to risk all at once, and not have to monitor the stock all the time to decide when to sell. The downside is that the investor could miss out on a potential gain if the market shifts suddenly and they can't change their bracket amounts before the stock sold.
Related or Semi-related Video
Finance: What are At-the-Close Order and...24 Views
Finance a la shmoop.. What are at the close order and at the opening orders
Well simply put they're a way of buying and selling stocks and bonds and [Shmoop video on PC monitor]
they're really a hybrid form of a limit order only instead of limiting the order
of a hundred shares of Mickey D's at 45 bucks or better the "limit"
is time-based that is it is placed a minute or less from the close of the
market like 3:59 p.m. New York time or the open of the market like 9:31 a.m. New
York time got it so why would someone do this kind of limit order well if a [Man discussing limit order]
company that day before had printed what looked like a really good quarter but
upon deep inspection the investor who owned the shares thought otherwise and [Man inspecting company folder]
you know wanted to dump them well then that investor would want to take
advantage of a high opening print and just sell it whatever the price was a
minute or two after the open making the bet that the stock would then trade down
after bigger smarter better analysis was published on the stock itself and then
everyone else went to dump it - so what about an at the close order well kind
of inverse of the same thing here a company's quarter will be announced at [4:28pm shown on digital clock]
4:30 p.m. New York time tons of excitement leading up to it so
"everyone" wants to be long the stock ahead of earnings but you think
earnings will disappoint like you know buy the rumor sell the actual news kind
of vibe so you want to hold the stock until the last minute that day and then
you just give the guidance to sell the stock that last minute of trading or at [Investor sells stock to market]
the close and you're out and now we have arrived at the close of this video... Adios! [Man waving on stage]
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