Buy Price


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	------------------------------------------------------- My Buy Price ------------------------------------------------------- The Current Price in the Weekly Picks table reflects the closing price on Friday. When creating orders to be placed on Monday it is important that you do not chase the opening price. Also, you want to protect from significant gap up or gap down in price. If the Typical Upside or Downside Remaining falls within the ranges below use the tolerance indicated. The opening price of a stock has little to no relationship to its last closing price! Many investors are surprised by this fact because logic dictates that the opening price should follow where it last left off. There are a few factors that could impact the opening price of a stock they are: News regarding the specific company News regarding the sector Current events that may impact the business of the company Finally, there are the market makers that are free to use any opening price they wish! Consider any retailer attempting to sell its inventory. The retailer may use a “keystone” markup (100% markup) or any multiple they choose. You may be surprised to learn that furniture and jewelry have some of the highest markups at a 6 to 7 multiple of cost. Now what on earth does retail markups have to do with opening stock prices! Just like retailers the market makers and brokerages houses own shares of stock. This is their inventory. Just like the retailer they are free to place any price they wish on the stock. Remember, the marketplace consists of willing buyers and sellers. Market makers are betting on momentum when opening prices are set. For example, if the market maker owns inexpensive shares of a stock they would like to see those prices rise. A gap up, for example, in price of $1.50 from the stocks close could generate the momentum to continue an upward raise all day. You may ask, “am I getting the best price for a stock or am I getting the best price for the market maker”? This is a subject for another article but you are certainly getting a better idea of what “painting the tape” is all about. What price to offer for a stock depends largely upon the historical daily trading range for that stock? This is why whentobuy.com has created a spread based upon the typical amount remaining for each stock. There is not a formula to determine whether one should be at the lower or higher end of this range. There are, however, a few factors to analyze before constructing a buy price. First, look at the pre-market indicators. If they are up you may wish to use the higher end of the range. If the indicators are down you may use the lower end of the range. Second, look at how the sector in which the stock belongs is opening. Third, look at current news for the stock or whether it is in play for the day (i.e. MSN or Yahoo Finance, free information source). Finally, look at a candlestick chart for the stock to determine the low and high price range for at least the last five trading days (i.e. MSN Money and stockcharts.com, free information source). If a stock has a Current price of $20.00 with $1.75 left in its typical upside move then the bid price would be $20.25. The Buy order may look like the following: BUY LIMIT 100 shares xyz-stock $19.75 Day Order Or BUY LIMIT 100 shares xyz-stock $20.25 Day Order You are telling your broker to buy 100 shares of xyz-stock at $20.25 or better, in other words any price less than $20.25. If the stock were to have a gap in price from the previous days close to the open of more than $.25 we do not know if the cycle has changed or if a market marker is “painting the tape”. Remember, the market maker can place any price they want on the opening price. It only becomes a valid price if someone buys at that price. Often times when a stock gaps up it typically comes back to the previous days closing price during the day. If you chase the price you lose! Other times the gap up produces the affect the market maker desires which is to cause the stock to continue to raise. If this is a stock you own the gap up is profit for you! If your order does not execute do not change the parameters to force the order to execute. You do not win by placing orders; you win by profiting from them! Whentobuy.com and this newsletter are provided for educational purposes only. No statement in the documents should be construed as a recommendation to buy or sell a security or to provide investment advice. It is possible at this or some subsequent time, the editors or staff of whentobuy.com may own, buy or sell securities discussed. All investors should consult a qualified professional before trading in any security. Before trading stocks or options you should understand the risks. In addition, anytime a stock or option is purchased or sold, transaction costs including brokerage fees are at risk. The information provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. Back \| Up Cycle \| Down Cycle \| Buy Price \| \| Weekly Research \| My Playbook \| \| Order Now \| Return Home \| Home Business \| Digital Economy \| Sign In \| Disclaimer \| Training Center \| FAQ \| What's New \| Contact Us \|