Do brokers really stop loss hunt or is it just perceived that way?
From investopedia
Stop hunting is a very common practice. Although it may have negative connotations to some readers, stop hunting is a legitimate form of trading. It is nothing more than the art of flushing the losing players out of the market. In forex-speak they are known as weak longs or weak shorts. Much like a strong poker player may take out less capable opponents by raising stakes and “buying the pot”, large speculative players (like investment banks, hedge funds and money center banks) like to gun stops in the hope of generating further directional momentum.
In a 4 trillion dollar market it is highly unlikely that a single broker can control price on a whim. The only way a broker could do this is by manipulating their data feed, which should never happen if your broker is a registered NFA member. Also, depending on your broker the spreads may get ridiculous during news releases. So at times it may appear that your trade got stopped out, despite having the price 10-20 pips away.
Great explanation yes it is 100% truth. The key is to understand it exists and then take advantage
The market seeks for orders, and stop loss orders are nothing more than limit bids.
Golden that’s bang on. I think of large pools of orders like a magnet to the market. So if there are a lot of any types of orders the banks will be attracted to them. They can not make huge moves without risking a lot. However they make money on commissions and it adds liquidity to the market.
This is why I don’t like tight stops. I think volatility is good but can create a lot of noise when trying to find trends. My personal preference is to use longer time frames to reduce the noise when things get hairy. There is only so much that at a stop breaker can push the market. To me it more important to follow the major trend then focus on short term indecision.
Cheers…
market makers dont hunt individual stops they hunt clusters of stops, to trigger and then unload,
ever wonder why on a fake break out, there is a powerful thrust towards breaking a price level (usually a whole number that coincides with a trend-line, S/R level) then orders recedes in a frenzy, creating wicks or spikes?
who do you think is behind those moves?:45:
how can you take advantage of this?
its not always brokers as they have to quote in line with market feed, although temporary deviation is not penalized
sometimes is the big players in the market that actually move the prices there.
but the point is the same, trigger the stops, buy and sell em back in a frenzy then the market quiets down.
hi all im new to this site just signed up. you can potentially avoid requotes and stop loss hunting if you join an ecn broker as they are not taking the other end of your trade and are just a straight through processing broker. hope this helps. just search google for ecn forex brokers and you can get a list of them.
Think calculated breakout trades would work well here. I used it a few time in my first demo. Seemed to work but was too aggressive on my limits and had to take a much smaller gain. The account was not fully functional so I had to improvise with an IF Then setup. I agree that a better understand of market movers is needed. In my IF THEN setups I set the “IF” beyond rang high or low to avoid fake-outs. Then I just let them sit a wait for the market to breakout. I will probably use is from time to time when I go live. However, I am testing my setup accuracy at the moment. So far I have price action working constantly but would like to add more setups to play the whole gambit of market conditions.
Cheers…
I don’t think that a broker will stop hunt an individual trade. It would be pretty easy to see just by comparing charts with a different broker. I think a more likely scenario would be a crooked broker delaying or pausing a price feed to create a situation to there advantage. That would be hard to prove.
Do they also tp hunt on the other side whenever they sl hunt? Whats the purpose?
I don’t know about brokers, but I do know someone who currently works for a very large managed fund who told me how he sat & watched a friend working for a bank / fund management co dump 150 million dollars into the forex market to show him how to take out clusters of stops, which they can see exactly where we place them on their screens :eek:
So next time you see one of those spikes take your stop out, you can thank my mate at his desk working for the big boys :31:
At times of low market activity, I think the market will just drift towards where there are more orders. Buying and selling is of such low volume compared to that waiting as stops, that the price moves towards these areas.
I don’t think the managed fund green as grass listed would pour in 150 million dollars just to take out stops. They wouldn’t put in 150 million dollars unless they thought the market was going that way. Lets say they thought the market was heading up. There were short stops higher up, alongside breakout long orders. They would calculate that there were enough short stops/buy orders there to propel the price up further so they placed 150 million to reach that tipping point. They wouldn’t just place 150 million to knock out stops and TP and whipsaw it back down because that would too high risk.
my friend is a stop rider lol
he cant hunt for stops but he profits on the trigger, he calls it “stupid orders” because they trigger on their own he times trigger esp on announcements or prior to announcements gets in on the “cascade” and unloads at the “bounce”
neat stuff, another friend of mine (he is retired now) he was the top dog at a tier 1 bank market maker in Singapore (i learned a lot from him) his traders would capitalize and sweep the “sitting duck levels”, to make money for the bank , as he hedge their exposure. they would unload big blocks 500 million dollars, to average out a better price as to adjust their risk parameters.
stop hunting is real, market makers see the order book.
Ive noticed with forex… that alot of new (shallow) highs/lows are made and then they turn right back. All this is very disheartning. lol
It is fact but not as most you think it is. In the sea of sharks there are dolphins too. Closing a loosing position it is hard to do and so the broker to avoid closing away from the stop loss and to prevent a legal demand for it by the trader, they widden the spread and pass the trade you lose to another trader or broker willing to buy it. You must remember in forex you are into a derivative market, it means you buy contracts relayed over cash deposits of a liquidity provider. You are nit buying currencies, you are buying contracts based on currencies statuts.
Regards.
Good info posted so far.
I never considered using SLs because I like to monitor my trades and never linger in any trade too long. But I’ve read SLs can be good insurance in case of power outages, Internet connection going down, a meteor hitting my house, my dog barking and distracting me, etc. and misc…
What I’m doing now is when I’m profiting I’ll set a SL in my profit so if anything happens I’ll still profit. I now understand that I’ll basically be joining the sitting ducks and stopped out, but I’ll still gain and I’ll be protected should something unexpected happen. I’m thinking a trailing stop would be better. shrugs Is this a good strategy? If not, what would be better?
All you can say about that spike for definite that’s 100% correct is that there were more buyers than sellers in the Market at that time.
Hello,
Here’s the answer(s) to your (the thread starter’s) question:
Stop Hunting With The Big Forex Players
And yes: that spike was ‘genuine’ (and for those that don’t believe that spikes are (can be) ‘genuine’ take a look at last Friday’s chart for the Dow Futures, as but one example, at any broker you like, at the time the NFP data was released)!!!
UNFORTUNATELY: although ‘hunting stops’ is ‘legitimate’ (as described in the article found on the link provided) there are some brokers who use variable spreads as a method to ‘illegitimately’ ‘hunt stops’. So ‘be careful out there’!!!
Regards,
Dale.