The auction strategy involves updating a buy limit order’s quote price when rising security prices threaten to override it. The investor consults with their broker to calculate a new limit price based on projected security activity. Making an offer requires a balance of research, logic, and instinct to acquire the highest value assets.
The auction strategy is used when an investor has placed a buy limit order on a particular security and circumstances dictate making a change to the order’s quote price. Making an offer generally becomes an attractive move when rising security prices threaten to override limit orders, and the investor still has a strong desire to purchase them.
To participate in the practice of bidding, the investor simply contacts the broker who currently has the buy limit order in question. A new limit price is calculated and used to update the existing buy limit order, rather than cancel the order. In general, the investor will take into account the increase in the price of the security to arrive at the new offer. By consulting with the broker, it is possible to project the activity of the security in the coming periods and obtain a revised limit price that is responsive to the anticipated trend.
Making an offer usually involves a mix of research, logic, and instinct. The idea is always to obtain the highest degree of satisfaction with the values acquired. Before choosing to bid, it is always a good idea for the investor to try to balance these three factors. Exercising caution before bidding will help ensure that the thrill of the chase doesn’t overshadow the practical task of growing a portfolio.
At the same time, making an offer is an effective means of holding on and riding the projected wave that will ultimately result in the acquisition of a valuable asset. It is not uncommon for an investor to have to revise a limit price to keep the buy limit order in step with market trends. Understanding when to raise an offer and having good reasons to do so often results in a transaction that adds great value to the portfolio and possibly opens the door to other lucrative opportunities.
Smart Asset.
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