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 are common advantages of investing in large cap stocks?

    Learn what large-cap stocks are and how investors can benefit from common advantages of adding large-cap stocks to their ... Read Answer >>
  2. What are the advantages and disadvantages of mutual funds?

    Mutual funds are currently the most popular investment vehicle and provide several advantages to investors, including the ... Read Answer >>
  3. How does a stop-loss order work, and what price is used to trigger the order?

    A stop-loss order, or stop order, is a type of advanced trade order that can be placed with most brokerage houses. The order ... Read Answer >>
  4. How often should I rebalance my taxable investment account?

    Learn how to recognize when it is time to rebalance your taxable portfolio, what you can do to ease the process and why you ... Read Answer >>
  5. Do hedge funds have ticker symbols?

    Discover whether or not hedge funds have ticker symbols, where you can find ticker symbols and the significance of a ticker ... Read Answer >>
  6. How often should I rebalance my retirement account?

    Learn how to rebalance your retirement portfolio as you age, and how to redistribute profits from outperforming funds to ... Read Answer >>
Related Articles
  1. Stock Analysis

    5 Stocks Below $10 That Have Crushed the Market

    These five small-cap stocks have been on fire. Should they be on your radar?
  2. Term

    The Difference Between a Long and Short Position

    Stocks are owned in a long position and owed in a short position.
  3. Investing

    5 Unique Pure Beta ETNs to Consider (SBV, BCM)

    Learn about five unique Barclays Bank iPath Pure Beta exchange-traded notes (ETNs) and whether these ETNs are suitable for your investment objectives.
  4. Markets

    Re-Emerging Markets?

    If you're wondering when will the emerging markets comeback be? Read on because is still young, but encouraging.
  5. Chart Advisor

    3 Short Sales in the Apple Ecosystem (AAPL, SWKS)

    Deteriorating sentiment should offer profitable short sales on the key Apple suppliers.
  6. Investing

    If Verizon Bought Yahoo... (VZ, YHOO)

    Verizon wants to compete with Google and Facebook in the mobile ad space. Buying Yahoo could help them do it, but it would need to be implemented properly.
  7. Investing Basics

    Why the Fiduciary Rule is Good for All Investors

    The new fiduciary standard should help lower what middle- and lower-income investors pay, on average, to brokers for retirement planning advice.
  8. Products and Investments

    Advisors: Watch Out for Confirmation Bias

    Here's how advisors can make sure that confirmation bias does not color their own perceptions as they manage clients’ portfolios.
  9. Personal Finance

    The 3 Best Government Money Market Funds (CPFXX, SPAXX)

    Discover three of the most popular and best performing government money market funds well suited for investors seeking capital preservation and minimal risk.
  10. Credit & Loans

    Now You Can Trade P2P Loans with Folio Investing

    A drawback of investing in peer-to-peer (P2P) loans was that you were stuck with them for the entire term. Now you can trade them with Folio Investing.
RELATED TERMS
  1. Bunny Market

    Bunny market describes a stock market that does not have an obvious ...
  2. Illiquid

    The state of a security or other asset that cannot easily be ...
  3. Outperform

    An analyst recommendation meaning a stock is expected to do slightly ...
  4. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure ...
  5. Oversold Bounce

    An oversold bounce is a rally in prices that occurs due to the ...
  6. Relief Rally

    A relief rally is an increase in market prices that occurs because ...

You May Also Like

Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center