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How Multi-Bracket Orders Can Help Optimize Performance within Futures Trading

, | March 8, 2024 | By

Making money in futures trading hinges upon how well you walk the fine line between risk and reward. On paper, it sounds easy ― simply cut off losers and let winners ride ― right? Well, as any veteran of the markets will tell you, trade management may be the single most challenging aspect of active trading.

Fortunately, there is a wide array of strategies that help take the guesswork out of open position management. Trailing stops and dollar-cost averaging are two of the most popular methods. One particularly useful way of optimizing performance is through the implementation of multi-bracket orders. Multi-brackets furnish the trader with the luxury of incorporating more than one profit target or stop loss into a single trade. In a way, multi-bracket orders let you have your cake and eat it too.

The Value Of Multi-Bracket Orders

When it comes to successfully implementing a futures trading strategy, identifying opportunity, risk, and potential reward are only part of the job. Capitalizing upon strong setups via efficient trade execution drives profitability. Multi-brackets help complete this task by automatically placing profit targets and stop losses upon the market in adherence to almost any desired parameter.

In practice, a multi-bracket order is an order-cancels-order (OCO) that combines a series of profit targets and stop losses for positions of more than 1 contract. Upon a new position being opened at market, the multi-bracket’s OCO functionality ensures the position is closed out when either the profit target(s) or stop loss is hit.

Any trades are educational examples only. They do not include commissions and fees.

The beauty of multi-brackets is their flexibility. They may be applied in a vast number of ways, limited only by the imagination of the trader. Below are a few applications that prove especially useful in futures trading:

  • Capturing Breakouts: The futures markets are renowned for their volatility. Bullish or bearish breakouts can occur in the blink of an eye, providing an opportunity for quick profits. Multi-brackets give traders the ability to place more than one profit target each at a unique price point. This ensures that profit is locked in from beneficial price action.
  • Trend Trading: Multi-brackets are useful for traders who want to realize profits while attempting to capitalize on a larger trend. For example, Erin the E-mini S&P 500 trader is interested in executing a bullish breakout scalp on the 9:30 AM EST cash open. In addition, Erin believes that price is likely to trend higher throughout the session. A multi-bracket takes the guesswork out of trade management, as the breakout scalp may be executed for a small profit while the trend trade remains live in the hopes of capturing a runner.
  • Stop Loss Modification: Multi-brackets can also be used in a similar fashion as trailing stops. As an example, assume that Erin’s breakout trade in the E-mini S&P 500 is quickly a success and hits its initial 8 tick profit target. While larger targets are still in play at +16 and +24 ticks, Erin wishes to eliminate risk exposure for the remainder of the trade. A multi-bracket may be programmed to automatically move the stop loss to breakeven upon the 8 tick target being hit. This feature is especially useful for those traders who wish to optimize the profitability of winning trades while limiting downside risk.

A big advantage of implementing multi-brackets is that they are fully automated. Upon the entry order being placed at market, the software trading platform does the rest. In addition to locating profit targets/stop losses, each is moved seamlessly without trader intervention. This greatly reduces latencies and promotes efficient, disciplined futures trading.

Integrating Multi-Brackets Into Your Futures Trading Plan

Perhaps the most attractive aspect of multi-bracket orders is usability. Given a robust software trading platform, the advanced applications of multi-brackets are easily adapted to almost any futures trading strategy.

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