I've recently been looking into placing conditional orders and came across these two types of conditional orders:

I looks like the OCO part of both orders is mostly used to set a "Bracket", basically an upper and lower limit on sell orders at the same time.

I understand the lower limit, since you want to sell at a certain point to limit your losses.

But I don't understand why people set a sell limit on the higher side. Wouldn't you want to maximize profits as long as the stock is going up? And a trailing stop loss / limit order would help reduce losses on a stock that's going up but may trend down later?

  • The links that you provided clearly explain these conditional orders. You have questioned "why people set a sell limit on the higher side". Trading techniques are an individual preference. Jun 25 '20 at 21:38
  • Thanks Bob, I completely understand trading preferences are personal :) but I'm just trying to understand the reason why someone would want to set up limits on the upside; whether there was something I was missing there.
    – Sam
    Jun 25 '20 at 22:03
  • I'm not going to suggest that a limit order is better than a trailing stop loss or vice versa. If one has a target price, a limit order achieves that sooner than a trailing stop. And as you pointed out, the limit caps the profit potential. So it boils down to a preference for a hard number sooner or not. Jun 25 '20 at 22:07

Say the price of a stock you've been holding has been hovering between $10 and $13 with occasional spikes as high as $14.

If you think that pattern is going to repeat, you might want to sell the stock the next time it spikes to $14. Your expectation would be that it will probably quickly drop back down into the $13 range, so you want to capture that opportunity while you can.

Of course, while you're waiting for such a spike, the price might start dropping. So you might also want to sell at, say $9.50 because that would indicate that you were wrong about the pattern repeating and perhaps the stock price will drop much lower.

  • Thanks, that makes sense, however wouldn't a trailing stop loss (% or dollar) help with this situation as well?
    – Sam
    Jun 27 '20 at 19:56
  • @Sam Yes, having both a stop loss and a take profit would do much the same thing. Jun 27 '20 at 22:45

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