A Cheaper Loser Or An Expensive Winner?

You might ask why would I want ever use a buy stop order? Doesn’t that mean that I will be buying my stock that I KNOW it will raise in value more expensive than if I have bought it now? That does sound true BUT are you 100% sure that the stock will rise? If you are, ok, then buy it. Do not use a buy stop order but let me say this: it is impossible to 100% sure about ANYTHING when trading in the stock market.

Increasing your chances

So, if I told you that if you were just a bit patient, you could increase your chances that you would be getting in a winner instead of a loser, would you like that? You might get the stock a bit more expensive, but which one is better: a cheaper loser or an expensive winner? I know my answer, no doubt in that. So, the good news is that this can be achievable with a buy stop order.

A good but stop order consists on placing this type of order and set it trigger to an important break point. Those break points that will probably cause some havoc and volatility and it might take the stock to move to higher grounds. Some good examples are the break of last day high, last week high or even the high of any of the previous 5 days.

The stock market has a memory; a short one true, but it still has a memory. So, it remembers what happened few days ago and what were the resistance and support levels that a particular stock had to go through. So use this info to properly place your buy stop orders and only buy AFTER the stock breaks this or that resistance. This way, you are ensuring that the stock has indeed buy power and it will continue to make higher highs.

By: Fernando Brinkerhoff

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Fernando Brinkerhoff is a proud contributing author and writes articles on several subjects. You can check out some other websites of his interest at Edging Timbers and Leggs Hosiery.