Bracket order types


There are two types of bracket orders: an OCO and a one-trigger OCO. Keep reading to learn about these two types of bracket orders.

OCO (one-cancels-other)

In this case, you already own the shares. To create the bracket order, you attach two exit strategy orders to your existing shares. Once one order is triggered, the other order is cancelled automatically.

Example of an OCO: Let's say you own 200 shares of XYZ stock valued at $50 per share. You want to set a profit target and a maximum loss exit at the same time so you don’t have to monitor the markets for major upswings or downturns. You could then place a bracket order with a profit target of $60 and a stop-loss exit of $40.

The trade calculation would look like this:

Order Value
Existing position $50 x 100 = $5,000
Profit exit Sell $60 x 100 = $6,000
Loss exit Sell $40 x 100 = $4,000

So, if the stock price hits $60, your shares would be sold and you would make a $1,000 profit. Alternatively, if the stock price hits $40, your shares would be sold and you would have a $1,000 loss. As soon one exit strategy order triggers, the other is cancelled automatically.

One trigger OCO (one-cancels-other)

The most important thing to understand about a one trigger OCO is that you don’t own the shares. You set up your bracket order with a primary order and two exit strategy orders at the same time. This allows the trader to define a profit and loss on their trade wihout having to constantly follow their positions.


You can place two types of one trigger OCO orders: long or short. Remember, you don’t own the shares. So, if you place a long, one trigger OCO order, you must buy the shares as part of the bracket order transaction. If you place a short, one trigger OCO order, you are borrowing the shares for the transaction and you will have to return the shares after the transaction is processed.

Example of a long, one trigger OCO: Let's say you believe that ABC stock will rise in the near future, so you place an opening order for 200 shares of ABC stock at $60 per share. Now you must buy the shares as the first part of setting up this bracket order. Next, you place a limit (profit exit) price of $64 and a stop (loss exit) price of $56 – that’s the risk you’re willing to take.

The trade calculation would look like this:

Order Value
Primary order Buy $60 x 200 = $12,000
Profit exit Sell $64 x 200 = $12,800
Loss exit Sell $56 x 200 = $11,200

This means if the stock price hits $64, you’ll make an $800 profit. If the stock price hits $56, you’ll have an $800 loss. So you are waiting to see what the market does but whenever one condition is met, the other is cancelled automatically.

Example of a short, one trigger OCO: In this case, you believe that ABC stock will drop in price, but you don’t own the shares so you borrow the shares to create the primary order of 200 shares at $60. Then to make it a bracket order, you place a limit (profit exit) price of $50 and a stop (loss exit) price of $70.

The trade calculation would look like this:

Order Value
Primary order Sell $60 x 200 = $12,000
Profit exit Buy $50 x 200 = $10,000
Loss exit Buy $70 x 200 = $14,000

If the market moves in your favour and the stock price drops to $50, you’ll be able to buy the shares for $50 and make a $2,000 profit. And if the stock price moves up to $70, you have set a loss limit and a loss of $2,000.