Info 1: buy stop definition
Info 2: how buy stop works
Info 3: buy stop vs market order
Info 4: example of buy stop
Opening information:
Buy stop breaks into two words buy and stop, buy means acquire something, and stop means place to end activities.
Buy stop means acquiring something at one end, so now let’s have a look at what a is Buy stop, how the Buy stop works in the public market, and what the difference between the Buy stop and the market order is. One clear example of the Buy stop.
Info 1: Buy stop definition
Mr.Thakip is a short-term speculator who trades multiple amounts of public securities for his living. But when comes to trading and holding more than one security, he normally doesn’t have enough time to exist in the online trading market.
Therefore he uses multiple amounts of technical advanced tools that help him to execute and close the trade orders at different times.
Because he knows that stocks are not controlled by any one person despite they are working based on demand and supply.
However Mr.thakip couldn’t able to predict and was unsure about when the market would reach his entry point price, so he used the order types which are offered by his broker to fulfill the order technically even when he was not online.
whenever he is offline when the market price reaches the market entry points of the amount in the order.
That order helps Mr.thakip to fulfill and execute the whole function by purchasing the amount of pre-determined shares at a marked market price.
Here the tool which is offered by the security broker to fulfill the purchase when the market price reaches his order purchasing price to purchase the determined stock is named a buy stop. Now let’s dive into how the buy stop is involved and works in the public market.
Info 2: how stop buy works
buy stop doesn’t represent any specific amount of object or things, instead, it’s a function of tools that are created to be used in trading securities.
The trading securities could be any kind of item of stock and debt instruments that are listed and approved by the government agency to raise money through public Investors.
Obviously, the buy stop is the one that is used when the market trader is not sure about that certain market would be raised in the future. once it’s raised, to not miss the opportunity of placing the order from the certain limits the Investor normally used the tool of buy stop to purchase the specific security no matter what.
At the same time who always thinks that the market would move down again and again without considering the upside market risk following the huge loss for such a trader?
So normally the Investor who looking to avoid the short position loss on the continuously rising market would use the tool of buy stop order as the key to purchasing the stocks if one stock market price reaches its buy stop order price.
Next, the public Investors who are involved in trading activities even when a certain trader is not actively involved in it, and guess that specific market would increase after reaching a certain price.
then such traders would use the buy stop order tool to execute the trade to purchase the particular stock even when Investors are not actively available to purchase it.
It doesn’t matter for what reason certain kinds of investors or traders use the buy stop tool, but the core central purpose and function of the tool is to purchase any kind of ordered security at the requested price.
Most people are confused about the buy stop and market order, so let’s jump into the key difference in it anyway.
Info 3: buy stop vs market order
The difference between a buy stop and a market order is that a buy stop refers to the market order but it’s not only a market order, a buy stop is one kind of market order to purchase the stock or debts once the market price reaches the buy stop price.
On the other side, market orders are the one that refers to the collection of multiple kinds of orders that are executed at the market, market orders are stop loss orders, take profit orders, sell stop orders, buy limits orders, sell limits orders extra….
To make you more clear about the buy stop, let’s look into one brief example below.
Info 4: example of buy stop
Say that you had requested two kinds of orders in the market for your holding position and new open position.
One position order is to close the trade with a loss once the market moves against a certain point, and another position is to purchase the security and open the trade in the market.
Here the two positions are categorized as market order but the position to buy the security automatically after a certain market price reaches the point would called a buy stop.