DEFINITION of 'Buy Stops Above'

A recommendation to buy a specific security when a the security's price exceeds a certain level of resistance by placing a buy stop order at that level of resistance. The trader's belief is that a good buying opportunity is present when the level of resistance has been breached and that upward momentum will prevail once the price moves beyond the barrier.

BREAKING DOWN 'Buy Stops Above'

For example, suppose a trader believes that, if the price of XYZ stock breaks above of $10, it will continue heading higher. This trader would likely choose to place a buy stop order at $10.01. This type of order turns into a market buy order once the level of resistance of $10 is breached and gives the trader exposure to capture further upward momentum.

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