Hey traders,
We at Bitbns have always focused on bringing you the best trading experience tailored for cryptocurrencies, with the help of tools and features that get you closest to conventional trading. And so far, the love we have received from you has been overwhelming.
Today we are giving you another reason to love Bitbns, even more. Today, we give you Bracket Orders along with Trailing Stop Loss.
What are Bracket Orders?
Basically, Bracket Orders are a combination of three orders: Entry Order, Exit Order (Target Order), and Trailing Stop Loss Order. Using a Bracket Order, you can set all these three orders at once, and reduce the risk of missing out on a trading opportunity by defining the points of execution. As soon as Entry Order is executed, Exit Order and Trailing Stop are queued for execution.
What is the role of Trailing Stop Loss in Bracket Orders?
Trailing Stop Loss Orders reduce losses in a dynamic way by adjusting the Stop Limit when the market moves favourably. Fixed Stop Limit Orders only reduce the losses when the market continues to move unfavourably until it hits the Stop Limit. In case of fixed Stop Limit, even though your order will still be executed as you planned, you will only reduce losses. Trailing Stop Loss, on the other hand, adjusts the Stop Limit automatically by a user-defined value that trails, usually referred as Ticks in stock trading, to significantly reduce the loss or even put you in a profitable situation if the market price crosses the entry order while moving in the unfavourable direction.
How Bracket Orders work?
For better understanding, we will take a look at separate examples that explain how Bracket Orders work when the entry order starts with:
Buying
The usual intention behind entering a new position via Bracket Order starting with buying, also called a Buy Side Order, is taking advantage of probable rise in the market to make profit.
1. Now let us say, you enter a new position with a Buy Order with Rs. 4,000 by purchasing 100 XRP, at a market price of Rs. 40 per XRP, with an intention to sell the same amount of XRP by the Trailing Stop Limit Order @ Rs. 35 with a trail of Rs. 0.50 or 50 Paisa.
2. From this point, two things may happen: the market may fall or rise, where ‘rise’ would be considered favourable and ‘fall’ would be considered unfavourable.
3. Now if the market moves favourably, Trailing Stop Limit would increase by Rs. 0.50 or 50 Paisa for every Rs. 0.50 rise in the market price. So, for instance, if the market price rises by Rs. 5 to reach Rs. 45, the Trailing Stop Limit would also rise to Rs. 40.
4. From here, if the market touches Rs. 50, your exit order or sell order will be executed, giving you Rs. 5000 with a profit of Rs. 1000.
5. If the market falls to touch Rs. 40, your exit or Sell Order will be executed at Rs. 40 bringing back your initial investment i.e Rs. 4000, effectively reducing the loss by Rs. 5 per token, compared to the Sell Order that would have been executed on touching the fixed Stop Limit of Rs. 35, giving you Rs. 3,500.
Selling
When you enter a new position via Bracket Order starting with selling, or simply called a Sell Side Order, you aim to leverage the probable fall in the market in order to exit with a profit.
1. Let us assume you enter a new position with a Sell Order, by selling 100 XRP for Rs. 4,000 at a market price of Rs. 40 per XRP, with an intention to buy back the same amount of XRP by setting a Limit Order of Rs. 30 per XRP.
2. You set the Trailing Stop Limit Order @ Rs. 45 with a trail of Rs. 0.50 or 50 Paisa.
3. Again, there are two possibilities here: market may fall or rise, where, this time, ‘fall’ would be considered favourable and ‘rise’ would be considered unfavourable.
4. Now if the market moves favourably, Trailing Stop Limit would decrease by Rs. 0.50 for every Rs. 0.50 decline in the market price. This means that if the market falls by, say, Rs. 5 to reach Rs. 35, the Trailing Stop Limit would also fall to Rs. 40. Beyond this, if the market continues to falls till it touches Rs. 30, your Buy Order will be executed, thereby purchasing 100 XRP for Rs. 3,000 at a market price of Rs. 30, giving you a profit of Rs. 1,000.
5. In case the market takes a U-turn, your Buy Order will still be executed at Rs. 40, bringing your initial investment of 100 XRP back in your token wallet, effectively reducing the loss by Rs. 5 per token, compared to the Buy Order that would have been executed on touching the fixed Stop Limit of Rs. 45, costing you Rs. 4500 for 100 XRP.
Important Note:
- To place a Sell Side Bracket Order, you need to have sufficient balance in your Bitbns INR wallet to allow your Stop-Limit Order to execute.
- As per the example mentioned above, the minimum balance in your INR wallet should be Rs. 4,500 (100 XRP * Rs. 45).
- This is important because Stop-Limit Order would not execute with insufficient INR balance to buy lesser number of tokens as the number of tokens to be traded is predefined while setting up the Sell-side Bracket Order.
Bracket Orders are now LIVE only for ‘Bitbns SELECT’ users for Beta-testing. For the remaining, Bracket Orders will be rolled out soon. Check out how to become eligible for Bitbns SELECT feature.
Update: Starting today (18th October 2018), we are rolling out this feature for all Bitbns users!
If you have any queries regarding Bracket Orders and Trailing Stop Limit feature, do join us at our ‘Ask Me Anything’ (AMA) session, live on YouTube. Stay tuned with our Telegram channel for updates on AMA timings.
Happy Trading
Bitbns
