Difference Between Bracket Order and Cover Order

A Bracket Order (BO) is an advanced intraday order type that allows traders to pre-define three components in a single instruction:

1. The main order (buy or sell)

2. A target order (profit booking)

3. A stop-loss order (risk control)

As soon as the main order is executed, the system automatically places both the target and stop-loss orders. Only one of these exit orders will get executed—whichever hits first. The other one gets automatically cancelled.

Key characteristics of a Bracket Order:

• Comes with both stop-loss and target

• Entire bracket must be closed within the same trading day

• Provides predefined risk parameters through a fixed stop-loss

• May involve margin requirements that vary based on the broker’s policies

• Auto-cancels remaining orders after one exit is triggered

• Mainly used for directional intraday trades

Because BOs automate both profit and loss exits, they suit traders who want structured, rule-based trading and disciplined risk management.

A Cover Order (CO) is an intraday order type that consists of:

1. A market or limit entry order

2. A mandatory stop-loss order

The stop-loss is placed simultaneously and must be within the broker-defined range. There is no target order in a CO. Traders exit manually or wait until the stop-loss triggers.

Key characteristics of a Cover Order:

• Mandatory attached stop-loss

• No target—exit must be manual

• Offers high leverage due to predefined risk

• Suitable for quick intraday entries

• Suitable for traders who actively monitor positions

Cover Orders are simpler than Bracket Orders and focus mainly on reducing risk while allowing the trader full freedom to choose the exit timing.

A BO begins with the main order. Once executed:

1. A target order is placed at a pre-defined price

2. A stop-loss is placed below (for buy) or above (for sell)

3. If the target hits then the position exits in profit

4. If the stop-loss hits then the position exits in loss

5. The remaining order is auto-cancelled

Example:

You buy a stock at ₹100 using a BO.

• Target: ₹105

• Stop-loss: ₹98

If the price hits ₹105 first, the profit is booked. If instead it falls to ₹98, the stop-loss triggers.

Bracket Orders ensure discipline + automation for intraday traders.

In a Cover Order:

1. You place a buy or sell order

2. You must enter the stop-loss range defined by the broker

3. Only after the stop-loss is entered does the main order go through

4. To exit, you must manually square off the position

5. If the stop-loss hits, the system auto-exits

Example:

You place a CO buy order at ₹100 with a stop-loss at ₹97.

If the stock falls to ₹97, the CO exits automatically.

Because risk is fixed upfront, brokers allow significantly higher intraday leverage.

Here are the key advantages of bracket orders:

• Automated profit and loss boundaries

• No need to watch markets continuously

• Supports predefined conditions

• Suitable for traders who prefer predefined targets

• Reduced emotional trading due to structured exits

Here are the key advantages of cover orders:

• Mandatory stop-loss may alter broker margin requirements

• Quick order placement suitable for scalpers

• Provides manual control over exit timing

• Simpler than BOs—suitable for beginners

• Suitable for high-volatility stocks

Even though both orders help manage risk, they come with limitations:

Bracket Order Risks

• Gets cancelled if initial order doesn’t execute

• Vulnerable during sharp gaps or high volatility

• Not available for all stocks or segments

• Target and SL levels may not allow tight placement during extreme volatility

Cover Order Risks

• No automatic target—you must exit manually

• In rapidly moving markets, stop-loss may slip

• Requires traders to monitor positions actively

• Higher leverage means higher exposure to losses if SL is wide

Traders may consider the order type based on market conditions and personal strategy.

Bracket Orders are typically applied when:

• You want predefined stop-loss and target

• Market volatility is moderate

• You need automation for both exits

• You prefer structured trading with minimal monitoring

• You want a strategy-driven approach

Use COs when:

• You trade volatile stocks or indices

• You want maximum intraday leverage

• You prefer manually timing the exit

• You are scalping or trading momentum bursts

• You can actively monitor markets

Bracket Orders and Cover Orders both help manage risk, but they cater to different trading styles.

• Bracket Orders may be considered for automated exits, predefined SL and target, and disciplined trading.

• Cover Orders may be considered for higher leverage, flexibility in exit timing, and quick intraday moves.

Understanding how each order functions ensures efficient risk management, smarter trades, and improved intraday performance.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.