When an investor believes there is a buy opportunity at a given price, which is above current market price, he or she can place a buy stop order. This way the investor would not “miss a perceived buy opportunity” once the stop price is reached. When the stock price reaches the stop price a market order is activated and the order gets executed at the best price available.
ABCD stock is trading at $10 per share. You, as the investor, understand that once the ABCD stock price reaches $15, it could go even higher. In this case, you can set a stop order with a stop price of $15, and once ABCD hits $15 per share, a market order will be activated and executed at the best price available. If ABCD stock price never reaches $15, your stop order won’t be executed.
Here is the step by step on how to enter a stop order: