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 a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  2. What's the difference between a stop and a limit order?

    Different types of orders allow you to be more specific about how you'd like your broker to fulfill your trades. When you ... Read Full Answer >>
  3. Are secured personal loans better than unsecured loans?

    Secured loans are better for the borrower than unsecured loans because the loan terms are more agreeable. Often, the interest ... Read Full Answer >>
  4. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  5. How is working capital different from fixed capital?

    There are several key differences between working capital and fixed capital. Most importantly, these two forms of capital ... Read Full Answer >>
  6. Do variable annuities guarantee returns of principal?

    Variable annuities are subject to the ups and downs of the market, so they do not guarantee returns of principal. To mitigate ... Read Full Answer >>
Related Articles
  1. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  2. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  3. Investing Basics

    A Beginner's Guide to Investing in Company Stock Plans

    There are certain advantages to investing in your employer's stock but there are some potential drawbacks to be aware of.
  4. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  5. Stock Analysis

    The 5 Best Stocks That Pay Monthly Dividends (PSEC, LTC)

    Get the scoop on five of the best stocks that pay regular monthly dividends, offering investors looking for regular income dividend yields of up to 16%.
  6. Stock Analysis

    The Top Rated Dividend Paying Stocks for 2016 (ABBV, BA)

    Discover five of the top-rated stocks that pay investors solid dividends that you may want to consider adding to your investment portfolio in 2016.
  7. Stock Analysis

    Are U.S. Stocks Still the Place To Be in 2016?

    Understand why U.S. stocks are absolutely the place to be in 2016, even though the year has gotten off to an awful start for the market.
  8. Term

    Understanding Market Price and Its Changes

    An asset’s or service’s market price is the current price at which it can be bought and sold.
  9. Investing Basics

    The Importance of Commodity Pricing in Understanding Inflation

    Commodity prices are believed to be a leading indicator of inflation, but does it always hold?
  10. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
RELATED TERMS
  1. Value Investing

    The strategy of selecting stocks that trade for less than their ...
  2. Sector

    1. An area of the economy in which businesses share the same ...
  3. Sortino Ratio

    A modification of the Sharpe ratio that differentiates harmful ...
  4. Swap

    A derivative contract through which two parties exchange financial ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The ...
  6. Issued Shares

    The number of authorized shares that is sold to and held by the ...
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center