A:

"Gather in the stops" is a trading strategy used by investors to trigger stop orders already in place so that the price of the stocks trade higher or lower. This strategy involves selling or buying vast amounts of stock to either drive down or drive up the stock price.

"Stops" refers to stop orders. A stop order is an order to buy or sell a stock when it reaches a particular price. There are two types of stop orders: buy stop and sell stop. A sell stop is used to guard against losses and is usually referred to as a stop-loss order. A stop loss order goes into effect when the current stock price goes below the purchase price. For example, an investor can buy a stock at $30 and put in an order to sell if it goes below $28. A buy order goes into effect when an investor is involved in a short sale. If an investor is short selling, he or she may sell at $30 and put in a stop order to buy at $28.

When an investor "gathers in the stops", he or she usually has a specific goal in mind: to either cause a decline or increase in a particular stock price. When massive amounts of a particular stock are sold, the stock price goes down and the reverse is true if massive amounts of a stock are bought. So if an investor "gathers in the stops" by selling large quantities of stock, the stock price goes down, stop loss orders to sell are activated and the price of the stock declines further. If an investor gathers in the stops by buying stocks, the stock price increases, buy orders are triggered and the stock price ascends further.

To learn more, read The Stop-Loss Order - Make Sure You Use It.

This question was answered by Chizoba Morah.

RELATED FAQS
  1. What is the difference between a stop order and a stop limit order?

    Learn the differences between a stop order and a stop limit order. Traders use these as stop losses and regular investors ... Read Answer >>
  2. Are stop orders only used for stocks?

    Learn about sell-stop and buy-stop orders, when and how to use stop orders and what other securities stop orders could be ... Read Answer >>
  3. When should I use a trailing stop order?

    Learn about trailing stop orders, how to use them and when they should be used through an extensive example. Read Answer >>
  4. What is the difference between a stop and a market order?

    Learn about market orders and stop orders, how they are used and executed, and the main difference between stop orders and ... Read Answer >>
  5. How can I use a stop order to limit my losses on a long stock position?

    Learn about stop orders, different stop order types, and how to use stop-loss orders and stop-limit orders to limit losses ... Read Answer >>
  6. What are the rules for placing stop and limit orders in forex?

    The high amounts of leverage commonly found in the forex market can offer investors the potential to make big gains, but ... Read Answer >>
Related Articles
  1. Investing

    Understanding Buy Stop Orders

    A buy stop order is an order to buy a stock at a specific price above its current market price.
  2. Trading

    Trailing-Stop/Stop-Loss Combo Leads to Winning Trades

    Combine trailing stops with stop-loss orders to reduce risk and protect portfolio value.
  3. Investing

    Stop Loss Order Strategy

    A stop loss order is an order placed with a broker to sell a stock immediately if it drops to a certain price. It's a common way for investors to protect themselves from the possibility of a ...
  4. Trading

    Maximize Profits With Volatility Stops

    Find out which type of volatility stop fits your trading objectives.
  5. Trading

    A Logical Method Of Stop Placement

    If holding on to losing trades is human nature, this tool will help protect you from yourself.
  6. Trading

    Manage Risk With Trailing Stops And Protective Put Options

    Using the right strategy can lower the risk of failure and protect your profits.
  7. Investing

    Trailing-Stop/Stop-Loss Combo For Winning Trades

    Traders use stop-loss orders by setting the maximum they’re willing to lose. A trailing stop is similar.
RELATED TERMS
  1. Gather In The Stops

    A trading strategy of driving down a stock's price by selling ...
  2. Trailing Stop

    A stop order that can be set at a defined percentage away from ...
  3. Bracketed Buy Order

    A buy order that is accompanied by a sell limit order above the ...
  4. Hard Stop

    A price level that, if reached, will trigger an order to sell ...
  5. Stop Hunting

    A strategy that attempts to force some market participants out ...
  6. Above The Market

    An order to buy or sell at a price set higher than the current ...
Hot Definitions
  1. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  2. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  3. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  4. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  5. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  6. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
Trading Center