Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Above the Market

What it is:

Above the market describes the price at which a person wants to buy or sell a security.

How it works (Example):

Let's say John Doe owns 100 shares of Company XYZ stock that he bought 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 right around $10. He puts in a sell order above the market, at $15 a share. When and if the stock gets near $15, the order will be filled.

The phrase also applies when buying. For instance, if John Doe wanted to buy Company ABC shares and they are trading at $15 right now, he could put in an order above the market at $12. When the price moves closer to $12, his order will be filled.

Why it Matters:

Buying and selling above the market is usually done with limit orders. Often, people buy and sell above the market because they are betting that whatever momentum they're seeing in the stock price will continue to a certain level -- at which they plan to profit. The idea is essentially "buy lower and sell higher."