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InvestingStocksBondsCryptoPersonal FinanceFundamental AnalysisTechnical AnalysisTradingBankingTaxes
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Over the Market

Above the Market
TradingTrading Skills and EssentialsTrading SkillsTrading Order Types and ProcessesTrading Orders

What Is Above the Market?

"Over the market" alludes to an order to buy or sell at a price higher than the current market price. The most common over the market order types incorporate limit orders to sell, stop orders to buy, or stop-limit orders to buy.

Over the market can be contrasted with "below the market."

Understanding Above the Market

Over the market orders are often utilized by momentum traders that want to trade in a similar direction as the prevailing trend but need to wait at the cost to continue moving in the trending direction to trigger their order to buy or sell.

For example, a momentum trader might place a buy stop order (or a buy stop limit) over a key resistance level to buy the stock once it breaks out. Should the security's price break through the resistance level, the investor might have the option to participate in a subsequent upward price move.

Another example might be somebody who buys a stock expecting it to go higher. They place a sell order at a price that will give them a decent profit. Since that sell order is over the current price, it is over the market.

Short sellers may likewise use over the market orders to strategically enter short positions. For example, a short seller might accept that a stock will be overvalued when it arrives at a certain point. Perhaps the stock is trading is at $80, but in the event that it gets to $90 the trader thinks it will be too overvalued to keep going higher. They might place a limit order to sell (short) around $90, in this case, to automatically initiate a short position without stressing over constantly keeping an eye on the stock.

Traders often pair over the market orders with different forms of technical analysis. For example, a trader might identify a trigger point while taking a gander at a chart pattern and utilize that trigger point to either enter or exit a long position.

The opposite of over the market orders are below the market orders, which are placed when a trader or investor wishes to purchase a security at a lower price or they want to sell below the current market price. These order types incorporate limit orders to buy, stop orders to sell, and stop-limit orders to sell.

Over the Market Order Types

Below are the most common over the market order types, along with how they are utilized.

  • Limit Order to Sell: A trader or investor that as of now possesses shares might place a limit order to sell at a price higher than the current market price. These are otherwise called take-profit orders (T/P) since the trader or investor is securing in profits. A sell limit order may likewise be utilized to enter a short position in the event that the price climbs to the order price.
  • Stop Order to Buy: A trader that is waiting for a security to break through a key resistance level might place a stop order to buy at a price higher than the current market price or more the resistance level. They possibly want to enter assuming the price has sufficient momentum to arrive at the order and additionally breakthrough the resistance.
  • Stop Limit Order to Buy: A trader that wants to purchase shares at a specific price, but no higher, can place a stop-limit order to buy, which ensures that they don't pay unexpectedly high prices due to slippage. Expect a similar situation as the stop buy order, but the investor is scared of paying too a lot if the stock gaps over the resistance level. Therefore, they place a limit on their stop order controlling the price they will pay.

Over the Market Example

Expect a trader sees a bottom process in Alphabet Inc. (GOOGL) set apart by a cup and handle pattern. The trader enjoys this pattern and perspectives it as an opportunity to buy once the handle approaches completion. The price consolidates within the handle, trading below $1,120 for several days.

They devise their strategy and place a stop-limit buy order at $1,121. $1,121 is the trigger price meaning the stop order portion of the price will be triggered at this level. But the trader wants to control the amount they pay, therefore they limit the price they will pay to $1,122. That means assuming the price moves above $1,121 they will buy any shares available between $1,121 and $1,122, but no higher.

The price moves above $1,121 and the order is filled, expect at an average price of $1,121.30. On the off chance that the price would have gapped above $1,121 and opened the next day at $1,125, the trader would have received no shares due to their buy stop-limit order. On the off chance that they utilized a standard buy stop order (no restriction), they would purchase at any price above $1,121 which means they would have bought at $1,125.

The price didn't gap higher though, thus the trader was filled with their buy stop limit at $1,121.30. Now that they realize they have a position, they place another order to exit at a profit. The trader accepts the price will try to climb to test the $1,200 region. They place a sell limit order just below that at $1,195. At the time this order is placed the price is close $1,121, so an order at $1,195 is over the market. The price proceeds higher and eventually hits the trader's sell order at $1,195, closing out the trade for a profit of $73.70 per share.

Highlights

  • "Over the market" alludes to a price or order that is over the current market price.
  • The opposite of over the market is below the market, where a price or order is below the current market price.
  • Common over the market order types incorporate limit orders to sell, stop orders to buy, and stop-limit orders to buy.