We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Buy Stop Order?

Malcolm Tatum
By
Updated: May 17, 2024
Views: 11,425
Share

Buy stop orders are an example of a means of entering a purchase request for a security that comes with the stipulation that the request be held until the current market price for the security is equal to the stop price for the asset. Buy orders of this type are usually employed when market trends indicate that the market price for some sort of security is about to enter into a period of increasing in value. Essentially, a buy stop order is a strategy that allows an investor to secure an asset when and if the market price begins to rise, without the need to constantly monitor the activity of the security.

As part of the process of entering a buy stop order, an investor will often go over the proposed market order with his or her broker. As part of the investigation into the feasibility of creating a buy order of this type, the investor and the broker will look at the past performance of the security in question. This detail will be evaluated in light of the current conditions that provide insight into market indicators of the day and how those indicators may or may not influence the future price of the security.

Applying this approach, it is possible to ascertain if placing a buy stop order on a given security has a good chance of yielding a good return on the investment. At the same time, it is also possible to get a good idea of how long it may take to reach a point where the market price rises to that of the current stock price, and how much more the security is likely to rise after the order is executed.

One advantage of a buy stop order is that there is a relatively small amount of risk associated with the transaction. Since the market price has to rise to a certain level before the broker executes the buy stop order, the only chance of losing money on the venture is if the security reaches the stop price and then begins to drop immediately after the security is acquired. Generally, an investor would have some time to note that the security is no longer climbing in price, and be able to sell the security at no more than a small loss.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Editors' Picks

Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
Share
https://www.wisegeek.net/what-is-a-buy-stop-order.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.