BO Order CO Order Risk with Entropy Automation

When it comes to Entropy trades, there is a specific risk associated with trading beyond 1 quantity or 1 lot as We advocate for Cover order and Bracket Orders.

In the context of equity trading, it is uncommon for individuals to engage in high-quantity buying or selling.

As a result, to mitigate risks, Bracket Order (BO) and Cover Order (CO) orders for derivatives are limited to a maximum of 1 lot for all clients.

By keeping the order size restricted to 1 lot, this issue stays within a manageable risk. Please be cautious with the volatile market and high quantity -

This is the same reason we do not automate Entropy in equity.

The NSE implemented a mechanism in 2015 to prevent self-trading, which occurs when a client simultaneously has both buy and sell orders open for the same stock at the same price. This mechanism aims to maintain fairness and transparency in trading activities, protecting investors’ interests.

You can read more about this mechanism here

When it comes to Bracket Orders (BO) and Cover Orders (CO), a specific situation can arise where the position is left hanging without a target or stop loss order. This occurs when the client places a counter order that matches the stop loss or target orders of the BO/CO.

For instance, let’s consider an example with Infosys stock.

  • You place a buy BO order at a price of 100 with a stop loss (SL) at 98 and a target at 104.
  • Then, you also place a sell BO order at a price of 102 with a stop loss at 104 and a target at 98.

In this scenario, your target (TGT) and stop loss (SL) orders will be canceled, leaving the position in a hanging state.

Placing a buy BO order above the current market price or a sell BO order below the current market price can lead to cancellation of target or stop loss orders. This occurs when a partially executed entry order’s remaining quantity matches with the target or stop loss order, leaving the position exposed without proper risk management in volatile market conditions.