Why Above the Market Orders Don't Work Investing in Stocks

The above the market orders happen when you place an order with your broker, with the intention of buying a stock as it is going up, usually through a resistance line that an investor has chosen. Some investors believe in technical analysis and they look at resistance, which is the point where a stock stats leveling out after moving up or down. At the supposed resistance level, it is believed that many times the stock will break its fall or uptrend and start going up or down until it meets resistance again. If an investor places an order like this, he or she can try to catch the upward trend of a security or investment supposedly after resistance is met and the trend starts upward. In an above the market order, you want the stock to be going UP breaking through some level before a buy order is placed and hopeful profit will be made.

Comments:

I don't think that this strategy works very well because it's based on technical analysis which doesn't always work. Warren Buffet himself said that he realized technical analysis didn't work when he could turn the charts upside down and get the same answers for his investing. It's assuming that when a stock meets resistance - or any investment that it will then turn around and keep going up. I think this is very unsound because many times instead of going up it will just fall down again. Experts have never been able to find any pattern in the stock market, and trying to rely on resistance for consistent returns is foolish for the stated reasons.

Many times however some investors simply can't resist the temptation of using technical tools like this to buy stocks because their friends, family, or supposed experts tell them it is a good idea. If you have to use this type of analysis for your stocks, than make sure that you cut your losses SMALL. If they stock does go down at least the losses can remain small if you use a stop limit order, however if you hold onto the security for more than one day market makers can make the price LARGELY lower than what you bought it for proving this philosophy foolish.

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