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'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 Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  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

    Protect Yourself From Market Loss

    There are several simple strategies you can use to protect yourself from downside risk.
  2. 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.
  3. Investing

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

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

    Intermediate Guide To MetaTrader 4 - Order Types

    Traders have the option of placing different order types using the MT4 platform. Market OrderA market order is the most basic type of trade order and is used to buy or sell a security at the ...
  5. Trading

    How To Start Trading: Order Types

    The types of orders you use can have a large effect on your trading performance, so understanding the different order types is important to your success.
  6. 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.
  7. Trading

    Manage Risk With Trailing Stops And Protective Put Options

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

    Mastering Stop Placement

    Place the stop loss where, if hit, the reasons you took the trade are no longer valid.
  9. Trading

    Simulator How-To Guide: Advanced Trade Types

    So far, you've only bought and sold stocks using market orders, which is essentially you instructing your online brokerage to "trade the numbers of shares I've instructed you to at the current ...
  10. Trading

    Online Stock Traders

    Online stock traders place buy/sell orders for financial securities and/or currencies with the use of a brokerage's Internet-based proprietary trading platforms. The use of online trading ...
RELATED TERMS
  1. Stop Order

    An order to buy or sell a security when its price surpasses a ...
  2. Hard Stop

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

    A strategy that attempts to force some market participants out ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop ...
  5. Stopped Order

    A market order on the NYSE that is stopped from being executed ...
  6. Soft Stop Order

    A mental price or percentage set by traders where they will place ...
Hot Definitions
  1. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  2. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  3. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  4. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  5. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  6. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
Trading Center