Bracket orders explained with one trade example

A bracket order is an entry order with a stop and a target attached to it. This note explains bracket orders with one trade example in the E-mini S&P 500 future, ES. The stop is an order to exit at a worse price. The target is a limit order to exit at a better price. The platform links the two so that a fill on one cancels the other. Traders call that link OCO, short for one cancels other. The note on market, limit and stop orders on a futures DOM covers the three order types a bracket is built from.

The three orders in one bracket

A bracket has three orders.

1. The parent is the entry. It can be a market, limit or stop order.
2. The stop child sits on the losing side of the entry. For a long, it is below.
3. The target child is a limit order on the winning side. For a long, it is above.

The children wait until the parent fills. If the parent never fills, the children never reach the market. Once the parent fills, both children go live as an OCO pair.

The example trade

The numbers below are an example of the mechanics, not a trade plan. ES moves in ticks of 0.25 points, and one tick is worth US$12.50 per contract.

The stop sits 8 ticks below the entry. If it fills at its price, the loss is 8 ticks times US$12.50 times 2 contracts, or US$200. The target sits 16 ticks above. If it fills, the gain is 16 times US$12.50 times 2, or US$400. A stop market order can fill below its trigger in a fast market, so the US$200 is a floor on the loss, not a cap. The note on stop market versus stop limit orders explains that gap.

Placing the bracket in Liquivue

Liquivue lists order entry from the chart, the DOM and an order panel, with brackets, OCO and trailing stops. In this example you set the bracket to 8 ticks of stop and 16 ticks of target, then place a 2-contract buy limit at 5,050.00 from the Liquivue DOM. The working buy limit shows at that row. The Liquivue heatmap draws the resting size at 5,048.00 and 5,054.00, so you can see how many contracts already wait at each child price before you send the order.

When the parent fills, the stop and target appear on the ladder at 5,048.00 and 5,054.00. Liquivue position tracking shows the size, the entry price, the profit or loss and the fills.

What happens on each path

Here are the three ways this bracket can end.

1. Price trades up to 5,054.00 and the target fills for 2 contracts. The platform cancels the stop at 5,048.00. The position is flat with a US$400 gain before fees.
2. Price trades down to 5,048.00 and the stop triggers. It fills at 5,048.00 or below. The platform cancels the target. The position is flat with a loss of at least US$200 before fees.
3. Price never reaches 5,050.00. The parent stays working and the children never go live. You cancel the parent or leave it working.

When only part of the entry fills

Suppose only 1 of your 2 contracts fills at 5,050.00, because a queue of other bids sat ahead of yours. You are now long 1 contract. Many platforms size the stop and target to 1 contract and add to them if the second contract fills later. Other platforms place the children at the full 2 contracts from the start. With full-size children, a stop fill sells 2 contracts against a 1-lot position and leaves you short 1. Test this in simulation on your platform before you trade more than one contract.

A trailing stop on the same trade

A trailing stop moves the stop child as price moves in your favour. Set a trail of 8 ticks on the same trade. If ES trades up to 5,052.00, the stop moves from 5,048.00 to 5,050.00. If price then falls back, the stop stays at 5,050.00. A fill there closes the trade at the entry price, before fees. Platforms differ in how often they update a trailing stop and whether the exchange or the platform holds it, so read the documentation before you rely on one.

Session limits around the bracket

A bracket sets the exits for one trade. Liquivue session risk controls apply to every trade in the session. A max session loss rule cancels orders, closes positions and locks trading for the rest of the session. Other rules cap contracts per instrument, limit the number of trades and add a cooldown after consecutive losses. Once a rule starts, Liquivue does not let you loosen it for that session.

Liquivue covers futures through Rithmic or the NinjaTrader bridge. The vendor says live-account acceptance over the NinjaTrader bridge is unverified and recommends starting in simulation.

Brackets on other platforms

Sierra Chart lists a Trade DOM for order entry. Bookmap lists live futures order entry on its Global+ plan with an eligible broker. The costs page sets out what each plan includes.

A check you can run

In a simulation account, place a 2-lot bracket and watch for a fill of only 1 contract. Simulators differ in whether they fill part of an order, so you may need several tries at a busy price. When it happens, read the size on the stop and the target. If both show 1 contract, your platform sizes children to the fill. If they show 2, a stop fill could leave you with a reversed position.