Bidding Up - Securities

DEFINITION of 'Bidding Up - Securities'

The act of increasing the price an investor is willing to pay for a security. Bidding up is most commonly associated with investors who use limit orders and is likely to be used when the price of a security in the market is increasing

BREAKING DOWN 'Bidding Up - Securities'

Bidding up keeps investors from being priced out of trades. When an investor places a buy limit order at a specified price, that investor is saying that he or she is not willing to pay any more than the price limit for a share. This strategy works in relatively calm markets. If the price of a stock is rapidly increasing, sellers are less likely to be willing to sell shares at the limit price if they can fetch more from other buyers. By increasing the bidding price, a buyer decreases the odds that the order will go unexecuted.

While the buyer may use a bidding-up strategy to improve order execution, he or she may inadvertently be contributing to increasing the share price. While it is unlikely that a single investor increasing limit order prices will put significant upward pressure on price, if enough investors follow a similar strategy they may have an effect.