2008-02-14

Bracketed Orders in Stock Trading

If you are planning to buy stocks as a long term investment you might want to consider placing a bracketed order on it.

A bracketed order goes one step further than a trailing stop order.

Remembering that a trailing stop order, you are in control of your investments because you are able to limit the amount of your losses by setting stop price.

With a bracketed order, you are able to not only set a limit on your losses, but you are able to set a limit on your profit, that when reached, your stock will be sold.

This type of order is best illustrated with an example.

Your broker places a bracketed order for 100 shares from Linens-n-Things, a department store, priced at $50 per stock, placing a sell limit order at $100 and a sell stop order at $45.

If the price per stock moves down to $45 or up to $100, the stock will be sold.

Therefore, the investor will either earn a $5,000 dollar profit, or take a $500 loss in profits.

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