What is ‘Gather In The Stops’
A trading strategy of driving down a stock’s price by selling large amounts of stock in order to trigger preset stop-loss orders, which in turn enhances the decline of the stock.
Explaining ‘Gather In The Stops’
This strategy may seem confusing at first, but is actually rather simple. Gathering in the stops occurs when traders sell large quantities of stock with the intention of triggering stop orders. Once a set of stop prices is reached, new sell orders are activated and transacted, causing the stock price to fall once again. This effect is continuously repeated, triggering more stop orders and therefore a rapid decrease in the stock’s price. Some exchanges may decide to suspend stop orders to mitigate this continuous effect.
Further Reading
- Do some forms of financial flows help protect against “sudden stops”? – academic.oup.com [PDF]
- Optimal stopping with multiple priors – onlinelibrary.wiley.com [PDF]
- Dual financial systems and inequalities in economic development – link.springer.com [PDF]
- Sudden flight and true sudden stops – onlinelibrary.wiley.com [PDF]
- The virtues and vices of equilibrium and the future of financial economics – onlinelibrary.wiley.com [PDF]
- Stopping rule use during information search in design problems – www.sciencedirect.com [PDF]
