Stop Hunting

AAA

DEFINITION of 'Stop Hunting'

A strategy that attempts to force some market participants out of their positions by driving the price of an asset to a level where many individuals have chosen to set their stop-loss orders. The triggering of many stop losses generally leads to high volatility and can present a unique opportunity for investors who seek to trade in this environment.

INVESTOPEDIA EXPLAINS 'Stop Hunting'

Understanding that the price of an asset can experience sharp moves when many stop losses are triggered can be useful when seeking potential trading opportunities. For example, assume that ABC Company's stock is trading at $50.36 and looks as though it may be heading lower. It is possible that many traders will place their stop losses just below $50, at $49.99, so that they can still hold onto the shares and benefit from an upward move while also limiting the downside. If the price falls below $50, traders expect a flood of sell orders as many stop losses are triggered. This will then will push the price lower and give some traders the opportunity to profit from the decline.

VIDEO

Loading the player...
RELATED TERMS
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches ...
  2. Weak Shorts

    Traders or investors who hold a short position in a stock or ...
  3. Weak Longs

    Refers to the group of investors that holds a long position and ...
  4. Speculator

    A person who trades derivatives, commodities, bonds, equities ...
  5. Short Sale

    A market transaction in which an investor sells borrowed securities ...
  6. Hard Stop

    A price level that, if reached, will trigger an order to sell ...
RELATED FAQS
  1. 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 Full Answer >>
  2. Why would a growth investor purchase shares of companies in the drug sector?

    The drug sector – particularly its newer, more high-tech biotechnology segment – offers stronger returns than the broader ... Read Full Answer >>
  3. What is a good annual return for a mutual fund?

    A "good" annual return on a mutual fund can only be gauged in a relative sense, influenced primarily by the investment goals ... Read Full Answer >>
  4. What does a high equity risk premium signify about a company's stock future?

    A high equity risk premium signifies that a company's stock future is uncertain. Equity risk premium is the excess return ... Read Full Answer >>
  5. When should I use a trailing stop order?

    Trailing stop orders are used to limit losses and protect profits on a stock position. You should use trailing stop orders ... Read Full Answer >>
  6. How many components are listed on the Dow Jones Industrial Average?

    The Dow Jones Industrial Average, or DJIA, is a stock index comprised of 30 different companies traded on the Nasdaq and ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Stop Hunting With The Big Forex Players

    Learn to bank short-term profits by placing stops away from the crowd.
  2. Forex Education

    Is Your Forex Broker A Scam?

    While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business.
  3. Active Trading Fundamentals

    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.
  4. Investing

    Top Alternatives to Penny Stocks

    Have the stomach for high risk? Consider these alternatives to penny stocks.
  5. Investing Basics

    How to Calculate Risk Premium

    Think of a risk premium as a form of hazard pay for risky investments.
  6. Investing Basics

    What is the Rule of 70?

    The rule of 70 is an easy way to calculate how many years it will take for an investment to double in size.
  7. Investing Basics

    Understanding Risk-Return Tradeoff

    The essence of risk-return tradeoff is embodied in the common phrase “no risk, no reward.”
  8. Investing

    How To Track Upcoming IPOs

    Interested in investing through IPOs? Here is the list of free sources for information on upcoming IPOs.
  9. Stock Analysis

    Occidental Petroleum: No Gas Stations, No Problem

    An in depth look at influential oil and gas company Occidental Petroleum.
  10. Investing

    These Investments Have Soared in 2015

    These five investments are on fire and still offer high potential going forward. Here's why.

You May Also Like

Hot Definitions
  1. Standard Error

    The standard deviation of the sampling distribution of a statistic. Standard error is a statistical term that measures the ...
  2. Capital Stock

    The common and preferred stock a company is authorized to issue, according to their corporate charter. Capital stock represents ...
  3. Unearned Revenue

    When an individual or company receives money for a service or product that has yet to be fulfilled. Unearned revenue can ...
  4. Trailing Twelve Months - TTM

    The timeframe of the past 12 months used for reporting financial figures. A company's trailing 12 months is a representation ...
  5. Subordinated Debt

    A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known ...
  6. International Financial Reporting Standards - IFRS

    A set of international accounting standards stating how particular types of transactions and other events should be reported ...
Trading Center