Above The Market
is an order placed at a price higher than the current market price.
Above the Market Details
Traders who choose to purchase or sell at a price higher than the current prices are considered momentum traders. Momentum traders are short-sellers who capitalize on short-term market action when trading their stock. Essentially, these traders use the market as a strategy for entering short-term positions in the stock market. They trade in an upward direction and wait for a resistance level on the market. That's when they make an order to profit from the upward trend.
Buying and selling above the market is completed with limited orders. People often buy and sell above the market because they bet that whatever momentum they see in the stock price will continue to a certain level. They plan to make a profit from the market price movement.
Example of Above the Market
Let's assume that John Doe owns 100 shares of Company XYZ, which he purchased at $10 a share. He wants to sell the shares today, but he doesn't want to take a loss, and the stock is trading at $10. He places the selling order above the market at $15 a share. When the stock comes close to $15, a trader will fill the order, and a trader will sell his stocks.
Another example of the above-market is real estate. More people have experience with real estate prices, as they are continually trending in an up-and-down fashion. Many real estate agents work when advising a seller on home pricing to provide a seller with a variety of offers, frequently a low sale price and a high sales price along with a home appraisal and comparable homes in the area. The seller chooses the listed purchase price, and it's the real estate agent who offers the details to better educate the seller.
A buyer may offer above the market price to make their purchase offer more appealing to the seller. For example, a buyer may offer $260,000 on a home that is listed at $250,000. The $10,000 price above the market makes the offer competitive to any other offers, increasing the buyer's chances of purchasing the home. But even with the above market offer, the seller holds the power to accept, counter, or decline the offer.
Types of Above the Market
There are three common types of above the market orders. They are:
Limit Order to Sell: A trader already owns shares of stock. They may place a limit order to sell at a higher price than the current market price.
Stop Buy Order: A situation where a trader waits for a stock to break through a resistance level so that they can position an order to purchase the stock at a price above the current market price.
Stop Limit Order to Buy: This is a tactic used by traders who do not want to pay high rates due to the inability to comply with the norm or time limit known as slippage.