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

March 20, 2019 by Daniels Trading| Tips & Strategies

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.

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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.

A great place to begin investigating whether multi-brackets may be right for your approach to the markets is Daniels Trading’s online dt Pro webinar series. Watch as seasoned professionals demonstrate the advanced utility of dT Pro and features such as multi-bracket orders.

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Filed Under: Tips & Strategies

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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Risk Disclosure

This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.

You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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