Download the Schwab app from iTunes®Get the AppClose

Trader Q&A: How Can Brackets Manage Trade Risk?

Schwab's Trading Services team discusses how risk management tools like brackets can help protect traders.

Click to show the transcript

[Lou] Let's take our next question. Pete in Florida, "What kind of risk-management tools does Schwab have in their trading platform, StreetSmart Edge?"

[Kevin] I'll be happy to speak to that for you, Pete. So in the Edge platform, you certainly have access to many of the same tools that you would expect in terms of risk management, your traditional stop and stop-limit orders that you get access to on the Web site of course. And probably the biggest step that the StreetSmart products have made is the access to bracket orders or conditional orders if you choose. You know, the bracket orders--what we talk about most with brackets are the opportunities to step into a trade in advance. So getting back to what we often will discuss, having a strategy, having a plan, building it out front and then protecting yourself immediately. So in Edge, you have the opportunity as well as .com to step into your trade and, upon execution, have your exit strategy both below the market as well as above the market level for you already implemented. And it's set with our server. So I do hear from time to time people are a little uncomfortable with the idea of a stop order being available to the market makers so to speak. And these are orders within our server at Schwab. So--
[Lou] So talk about that really quick.

[Kevin] Sure.

[Lou] Often, clients will say they don't want their order to be seen by a market maker, especially if they're placing a stop. You're saying, if they place that bracket order, the market won't see that order?

[Kevin] That is correct because the details of that order--those brackets are associated with our server and our detail. So when the conditions of that bracket are met, our system is submitting a market order on your behalf at that moment. And that's the moment that the market sees that order.

[Lou] Great. Also, that's removing the emotions, right.

[Kevin] Absolutely.

[Lou] Before they buy into the stock, they're already setting up that plan. Rob, do you mind telling us--if a client is trading currently with Schwab and they're already in a position that they're trying to add a bracket to, can they do that? And how would they do that?

[Robert] Absolutely. So not only does Schwab give you the ability to add a bracket on your initial purchase. But you can add it afterwards. Maybe you already own, you know, 1,000 shares of a company. And you think, boy, I've owned this company for a couple years. I'm not quite sure what I want to do with it. But I think there is some risk coming. Maybe you add a bracket at that point, you know. You can add a bracket later. You can also add a bracket just for a portion of the number of shares that you own. You're not required to do it for the full number of shares that you have with the security. You have 1,000 shares. Maybe you only want to bracket 300.


Schwab has tools to help you mentally prepare for trading

Learn more >

Talk trading with a Schwab specialist anytime.
Call 888-245-6864
M-F, 8:30am - 9:00pm EST

Get 500 Commission-Free Online Equity and Options Trades for Two Years

Learn More >

Important Disclosures

Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through Schwab. Covered calls provide downside protection only to the extent of the premium received and limit upside potential to the strike price plus premium received. With long options, investors may lose 100% of funds invested. Multiple-leg options strategies will involve multiple commissions. Please read the Options Disclosure Document titled Characteristics and Risks of Standardized Options.

Any opinions expressed herein are subject to change without notice at any time.

Schwab does not recommend the use of technical analysis as a sole means of investment research.

Past performance data should not be construed as indicative of future results.   


Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.