Difference between bracket order and cover order

Bracket Orders (BO) and Cover Orders (CO) are intraday trading tools for managing risk and profits. They differ in functionality: BO combines entry, target, and stop-loss orders, while CO combines an initial order with a compulsory stop-loss, focusing on loss mitigation.

• Bracket Order (BO)

A Bracket Order is a three-leg order that includes:

• Entry Order – Buy or sell at a specified price.
• Target Order – A limit order to book profits.
• Stop-Loss Order – A stop-loss to limit losses.
• OCO Mechanism – If the target is hit, the stop-loss is canceled and vice versa.
• High Flexibility – Traders can set both profit targets and stop-loss levels.
• Auto Square-off – Since it is an intraday order, it is squared off before the market close if it is not executed.

Example:
You place a Bracket Order to buy a stock at ₹500 with:

• Target at ₹550
• Stop-loss at ₹480

Once executed, the system places the target and stop-loss orders. If one is hit, the other is canceled.

2. Cover Order (CO)

A Cover Order is a two-leg order that includes:

• Entry Order – Buy or sell at a specified price.
• Stop-Loss Order – A mandatory stop-loss to control risk.
• No Target Order – Only stop-loss is placed, so you must manually exit the trade for profits.
• Higher Leverage – Since stop-loss is compulsory, brokers offer higher leverage.
• Auto Square-off— This is also an intraday order, and if it is not exited manually, it gets squared off before the market closes.

Example:
You place a Cover Order to buy a stock at ₹500 with:

• Stop-loss at ₹480

You must exit manually for profits or wait until stop-loss is hit.