Buying and selling stock above the market means trading based on a probable or possible increase in price. Setting investing orders that buy or sell after a stock rises is known as trading above the market. Several different stock trading orders that even novice investors at discount brokerage sites like E-Trade and TD Ameritrade can use employ this tactic. Following is some information on above the market stock trading strategy.
Above the Market Stock Trading Strategy
Trading above the market means setting buys or sells that anticipate the possible increase of any concerned security’s value. For instance, if a stock is trading at $4, and an investor wants to take on shares if it should show upward momentum, an order that buys after an increase in value would conform to the above the market stock trading strategy. Conversely, if an investor has shares of a stock, and wishes to unload them at a higher price via the limit order, the investor would be selling above the market.
Different Stock Trading Orders for Above the Market Trading Strategy
There are three key exchanges that allow investors to buy and sell above the market at certain times (two buys and one sell): the buy stop and the buy stop-limit purchase shares above the market, and the standard sell limit order unloads stock at a certain price or better.
Buy Stop Order Above the Market Stock Trading
A buy stop order trades above the market. For example (like that above), if a stock is trading at $4 per share, an investor could set a buy stop trade with a stop price of $4.50. Then, the order would activate only if the price should reach the stop price while the order is live.
Buy Stop-Limit Above the Market
The buy stop-limit is the same as the stop, except it sets an upper limit on how much can be spent. For instance, reverting to the last example, a stock trading at $4 per share could have a stop-limit buy set with a stop price at $4.50, and a limit price at $4.75. Then, if the stock rises, shares will only be bought once the stop price has been reached, only if they can be purchased within the limit (at or below $4.75).
Sell Limit Exchange
The sell limit order can also be used to trade above the market. If an investor is holding onto shares of a stock that is trading at $10 per share, a sell order with a limit price at $12 could be set. This will only fill if stock can be unloaded at $12 or more per share.
Above the market stock trading is a very basic technique. It means buying stock that begins to show upward momentum, or selling stock that rises to a certain price, securing satisfactory returns.