Trading halts occur when a stock exchange temporarily or indefinitely suspends trading of a security for a variety of reasons.
There are several different reasons a trading halt may be implemented - news pending, volatility pauses, a request for additional information. This link has a full list of halt types and codes Nasdaq halts. To see a list of stocks that are currently halted go to Current halts. Some halts can last a few minutes, a week, or even indefinitely. Volatility trading pauses occur regularly and are nothing to be concerned about as they will usually resume with in minutes. When a stock is halted buying and selling stops, but options can still be exercised.
Related to your trading:
The trading halt you really need to watch out for is the T12 halt. In this scenario a stock can be indefinitely paused and sometimes it may not reopen at all. Your cash can be stuck and if short, you can accrue massive interest charges. It usually occurs on the Nasdaq or OTC markets with smaller cap stocks that may not have been vetted well. Commonly, they have small floats and are easy manipulation targets. Often times the company is deemed Nasdaq deficient for not maintaining continued listing standards. Sometimes a stock will resume and be delisted to the grey market. This often concludes in a 80% drop in the stock. Bottom line is be sure to be careful if a stock of this nature has volume that is not explainable. I have been noticing some untimely halts recently and it seems these may be backed by some sort of an agenda. Chinese low floats, shipping stocks are examples of stocks to be wary of trading. If something just doesn't feel right about a move, stay away. Unusual trading activity can often be a target for halt because an exchange like Nasdaq will want an explanation.