How to Do a Set Buy for Stocks

There are two basic ways to buy stock in the stock market in relation to price paid for that stock. An investor can put in what's called a market order which will buy the stock at the current price during trading hours. The other is a set price that the investor determines he wants to pay and the order is executed only when the stock reaches that price.

Things You'll Need

• Brokerage account

Instructions

1. Research the stocks to be invested in and determine a desired price for the stock. Many investors will study the charts for a stock to get an idea of the low and high price levels the stock has hit in a given period of time. This gives the investor more chance of successfully buying low and selling high.

2. Determine the type of limit buy to employ. Using a standard limit buy an investor will set a price he wishes to pay for the stock and if the stock reaches that price or below then the order executes and the stock is bought.

3. Place a stop order to insure an entry price. A stop order will execute and becomes a market order when the stop price is surpassed. Many times this is used by traders when they may be unavailable to keep an eye on the stock. The stop order differs from a limit buy in that the order will execute as a market order once the stop price is exceeded which means the price paid could be substantially higher than the investor intended to pay. The limit buy insures the investor pays that price or lower.

4. Place a trailing stop order to have even more flexibility. A trailing stop is a stop price with either a percentage or dollar amount above the market price for a buy order which adjusts downward as the price declines thereby trailing the market price. When the market price goes up the stop order executes usually at a lower price than originally set giving the investor a lower buy in on the stock.

References

• Investopedia-Stops
• Investopedia-Trailing Stops
• Investopedia-Limit