Stop-buy order

A stop-buy order enables an investor to buy shares at a higher share price than the current price when they place the order. An investor chooses this order if they believe a company has huge growth potential or is undervalued. For example, if a company’s stock has sat around $18 for a while, an investor may put in a stop-buy order to buy shares at $20. This is because they believe once that share price is hit, the floodgates will open, analysts and investors will take notice, and the share price could continue to rise. Stop-buy orders come with risk because share markets are volatile. Over a normal US market day, for example, share prices could swing up or down by 10-20%. This means a stop-buy could be triggered just before the share price starts to drop, so instead of paying a slight premium to buy shares on the way up, investors may have paid top dollar for them. When an investor makes a stop-buy order, it’ll turn into a market order as soon as the share price hits their stop-buy price. This means they’ll get the best available price once the stop-buy order is triggered and the order is placed. So if the price jumps up from $120 to $125 (or $150 etc.) between the order being triggered and the market open, that’s the price they’ll pay to buy the shares. Read more about placing stop-buy orders on Hatch.