Buy Stop Order

A Buy Stop Order is an order to buy a stock at a price above the current market price. Once a stock's price trades at or above the price you have specified, it becomes a Market Order to buy.

Example: Suppose you are looking to buy 100 shares of Intel (INTC) if the stock's price shows that it wants to go up. Assume INTC is currently trading at $20 per share and you believe that if the price rises to $22 or higher there will be continued upward momentum. You place a Buy Stop Order @ $22 on INTC.

Suppose INTC then proceeds to trade up to $22. At that time, your order would become a Market Order to buy and your order would be filled at the next best available price.

The main benefit of a Buy Stop Order is that you will only purchase the stock IF the price is showing upward momentum.

But, if the stock price reaches your stop price, the stock may change direction to the downside and you may have just purchased the stock at its high. Also, once your stop price is reached and your order becomes a Market Order to buy, you may be filled at a price higher or lower than your stop price.

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