Definition
Cover Order
A cover order is an intraday order placed together with a compulsory stop loss, limiting your maximum loss from the outset.
A cover order bundles your main buy/sell with a mandatory stop loss order in a single step. Because the downside is capped by the built-in stop, brokers historically offered higher leverage on cover orders.
Unlike a bracket order, a cover order has no automatic profit target, just the entry plus a protective stop. It is an intraday product favoured by traders who want defined risk, though its leverage advantage has shrunk under SEBI's peak-margin norms.
Related terms
- Bracket OrderA bracket order is an intraday order that simultaneously sets a target (profit) and a stop loss around your entry, automating the exit on both sides.
- Stop LossA stop loss is a pre-set order that triggers an automatic sell (or buy, for shorts) once a security hits a chosen price, capping your loss without you having to watch the screen.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.