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 buy limit and a stop order?

    Learn the difference between buy limit orders and stop orders, including stop loss orders, and understand the risks of the ... Read Answer >>
  2. 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 >>
  3. What's the difference between a stop and a limit order?

    A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. With ... Read Answer >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
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

    Increase Your Profits With Soft Or Mental Stops

    A soft stop provides a trader with added flexibility, allowing him to react to ongoing changes in the market.
  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. Trading

    Forget The Stop, You've Got Options

    Using options instead of stop-loss orders adds finesse and control in limiting losses.
  8. Investing

    The Truth About Investing Using Stop Losses

    Stop losses are supposed to save you money when a stock's value falls, but they end up costing more.
  9. Trading

    The Stop-Loss Order - Make Sure You Use It

    It's a simple but powerful tool to help you implement your stock-investment strategy. Find out how.
RELATED TERMS
  1. Trailing Stop

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

    A buy order that is accompanied by a sell limit order above the ...
  3. Stop Order

    An order to buy or sell a security when its price surpasses a ...
  4. Stop Hunting

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

    An order to buy or sell at a price set higher than the current ...
  6. Stopped Out

    The execution of a stop-loss order. Stopped out refers to when ...
Hot Definitions
  1. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  2. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
  3. Collateral Value

    The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal ...
  4. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  5. Current Account

    The difference between a nation’s savings and its investment. The current account is defined as the sum of goods and services ...
  6. Liability

    Liabilities are defined as a company's legal debts or obligations that arise during the course of business operations.
Trading Center