Is stop loss hunting avoidance worth it?

Beginner Questions
23

Appreciate the feedback guys, not impressed, it is an ASIC registered Australian Broker…with an ECN account… No names for slander reasons… sorry

Although as most Australian’s know, ASIC don’t have the intestinal fortitude to take on any Financial Institution…

My secondary broker P/Stone has the same price as you @ 1.04788

Hi Alex, on small “at screen” scalps I usually run a mental 4 pip stop. My main reason for hard stops are in case of rerates like the USD during the week… where the price runs big time.

I will contacted them for a please explain…

24

[I][B]Slander[/B] n. oral defamation, in which someone tells one or more persons an untruth about another, which untruth will harm the reputation of the person (or entity) defamed. Slander is a civil wrong (tort) and can be the basis for a lawsuit. [/I]

But technically what you’re referring to here is [B]libel[/B]. [I]Libel is the written or broadcast form of defamation, distinguished from slander, which is oral defamation[/I]. - Legal Dictionary|law.com

Point being that naming them would not be libelous unless what you’re telling us is not the truth.

I’m not a lawyer just so you know…

25

Hi Everybody,

Thank you, Clint and Lexys for the correction on the math. It’s a simple thing to understand, and very significant. Don’t know how I missed it.

Thanks to everyone else for your comments on stop hunting and stop placement. I think they’ve brought me into a better balance.

Take care,
Norm

26

I see… Libel then… clue

Reason from support for price discrepancy from 4 other brokers… [I]" it’s the ticks our liquidity provider gave us…"[/I]

Would upload the chart shot " You don’t have permission to perform this action"… Babypips…too hard.

27

and another thread on babypips where a simple question was asked and yet noone answared it.

from “how to milk a goat” to “how to bake a donut” weve seen all answares… besides a simple answare on the simple question.

yes norm, it is worth it. if you are a daytrader you dont need to consider it. a swing trader should pay attention to it and a long term trader should avoid these zones and stop losses.

anyways. everyone focused on the simple math thinking norm got the math wrong. but on fact norm has the right math calculation here: wider stop loss + same amount of money risked = less profit in a profitable outcome of the trade.

the question was a very statistical one:

is it better to earn less money or to risk beeing stopped out more often? the usage of the word “pip” was the mistake norm did and people bited the bait and focused on pip calculation.

28

Ok Nero… lets Milk this Goat…
So the market (Re: Brokers) makes it riskier and riskier to take a tight stop position, continually artificially opening spreads to take out stops or move away from profit… so the retail (newbie) punters are required (almost forced) to go to larger stops with smaller positions and therefore reduce winning trades to smaller profits.

Now lets poke a hole in that Donut…
Yet all the while their now reduced position stop is the same dollar value as their larger tight stop… lock the losses and reduce the profits… Sounds exactly like how a Casino would better it’s odds…

Finally get the market makers to bang on via Youtube, Websites, Newsletters and Forums to do this and you have controlled traders behaviour… and increased your industries profitability under the guise of helping them. win…win…

After trading Shares for over 10 years and seeing the unscrupulous “upramping” or P&D strategies that was prevalent in some forums… Although I am a full time trader and profitable, I have absolutely no faith in the financial markets.

29

Yes, Rhody. My error was confusing stops in relation to position sizing and stops in relation to pip value. I’m straightened out now.

Thanks,
Norm

30

As much as i’m sure we all appreciate your own answer here, an answer which you have clearly stated in response to all other answers being invalid; perhaps you could say why your above statement holds true. To me your answer looks very much like an opinion, no?

31

Hi TURBONero,

Thanks for the response.

For your consideration and mine, your statement that day traders don’t need to worry about stop hunters but that swing traders do is contrary to what Nial Fuller says in Why I ‘Seriously’ Hate Day Trading » Learn To Trade

“Day traders naturally have stop losses closer to the market price since they are typically trading intra-day charts and trying to get quick gains with tight stops. The “big boys” and institutional traders love the average retail day-trader because they give them plenty of stops to “hunt”. Being a day trader and entering a lot of trades each week means it’s a lot harder to have a high winning percentage, largely because you get stopped out so much. Institutional traders have access to information on order flow and where stops are placed; it’s not only brokers who go “stop hunting” but the bigger institutional traders who can “sniff out” where the smaller intra-day traders are placing their stops.”

So, here again there’s disagreement. If you’d care to respond, I’ll consider it.

Thanks,
Norm

32

Hello Norman,

That’s an interesting read and although I am not an advocate of Nial Fuller I have to agree with some of the aspects that he mentions. Although, quite frankly he is coating in sugar what has been said many times before by other traders, it’s basic knowledge that lower time frame trading encounters more irrational price movements. I believe that this is also mentioned here in the BP school.

There is always going to be a fine line between what is honest information and what is believable dishonest information with the addition of being a known ‘celebrity’. Lets face it, Nial Fuller could most probably [im not suggesting this] fabricate a method and it would be believed by 75% of retail traders as true and honest. Now If I tried the same idea I would in most instances get slaughtered…

My point is that social media is powerful. Yes he has done well for him self and he talks of conflicting objective by trading intra-day from the trader and the broker; however what conflicting objectives could Nial Fuller be commencing in so that he can drum up a client base for his paid course.

There is of course no answer, but it adds to the unknown of this industry.

33

I’m also not an advocate of Nial Fuller but also have to agree with quite a bit of what he says, there. (In my opinion, it isn’t all really relevant, though, and some of it also isn’t very important anyway, to be fair.)

“Day traders naturally have stop losses closer to the market price since they are typically trading intra-day charts and trying to get quick gains with tight stops.”

Well, obviously intraday traders use smaller positions and therefore tighter stops, overall. Unarguable, really, but it doesn’t in itself signify much interesting?

‘The “big boys” and institutional traders love the average retail day-trader because they give them plenty of stops to “hunt”.’

Can’t really argue with that … but it relates (IMO) to what I said above about maybe entering too early if this is an issue.

“Being a day trader and entering a lot of trades each week means it’s a lot harder to have a high winning percentage, largely because you get stopped out so much.”

I suppose that’s technically true, if you look at an average, but (a) an average includes scalpers, and (b) most retail “fast intraday traders” have comparatively little idea what they’re doing and there’s always a huge [I]turnover[/I] of them, so it’s not really a very helpful or useful observation, overall?

“Institutional traders have access to information on order flow and where stops are placed”

That’s true to all intents and purposes, but (a) anyone can access order flow, if they want to, by looking at the proximal equivalent forex future (it’s effectively the same thing - and the prevalence of HFT’s in the market these days makes sure that it’s staying that way), and (b) anyone can work out - to some extent - where a lot of stops will be placed, if they want to, and position their own accordingly to take account of it.

“it’s not only brokers who go “stop hunting” but the bigger institutional traders who can “sniff out” where the smaller intra-day traders are placing their stops.”

If they even care, yes. I’d call that “true but not really relevant”.

As Jezzode rightly says, just above, it’s basic knowledge that lower time frame trading encounters more irrational price movements.

I also agree that Nial Fuller is, in this context, such a “celebrity” that a significant proportion of retail traders are going to accept whatever he says without examining it too closely.

34

Interesting followup in the Age Newspaper 21-12-2016

CBA and NAB admit impropriety in foreign exchange trading

Only one instance where they got caught!!.. Why no one should have faith in financial institutions…

35

Hi Lexys,

What do you mean by the proximal equivalent forex future, and how does one access it?

Also, this is not addressed to you in particular, but to all who commented about Nial Fuller. According to Nial Fuller Wins Million Dollar Trader Competition » Learn To Trade, “Nial Fuller Wins Million Dollar Trader Competition.” . . . “with a 369% return on investment.” When I read that, my esteem of him as a forex teacher skyrocketed. Why, then, has so much aspersion been cast on what Nial says in this thread?

Thank you,
Norm

36

"Interesting followup in the Age Newspaper 21-12-2016

CBA and NAB admit impropriety in foreign exchange trading."

Thanks for the article, WTJ.

37

Hi Norm,

Proximal = the nearest month’s futures. These are (to all intents and purposes) the same as spot forex, except that they’re centrally traded and therefore “volume” and “order flow” are available.

The prevalence of all the HFT arbitrageurs in the market predicates that any difference between the nearest “future month’s” price and the spot price is going to be extremely brief (milliseconds) and very small, so it’s reliable enough, to be able to judge the buying pressure and selling pressure (which is of course exactly what “order flow” signifies).

You would access it through a data-feed linked to the CME, where the futures are traded.

I believe that if you’re not actively trading them, but want them only for “information”, it costs only about $5 per month, so it’s not a huge deal.

It may even be possible to get a free trial, for a while, to see if it’s helpful, and you could do that by opening a demo account with a futures broker (such as AMP, NinjaTrader Brokerage, or whatever).

I don’t know how long the free demo of futures data would be for (but it’s clearly not going to be “time-unlimited” like a demo spot forex account with Oanda or wherever, because providing the data for order-flow and volume does actually cost the broker [I]something[/I], even if it’s pretty nominal).

Mine, on the other hand, doesn’t [I][U]at all[/U][/I].

Success in trading competitions is dependent on [B]totally different[/B] parameters from those applying to successful retail/indpendent traders, Norm.

One is about [I]risk management over profit maximisation[/I], and the other is the [B]diametric opposite[/B].

Really - they’re not just “different approaches”: they’re totally opposed and [B]directly[/B] conflicting approaches.

This is why “competition winners” very often make [B]dreadful[/B] trade managers, and why there are so many “investment accidents” involving them.

I’ll say no more about Nial Fuller, since you seem to be such an enthusiast, and offer another example, instead, of the kind of thing that’s (sadly) all too typical … someone called Larry Williams, of whom you’ve perhaps heard, did exactly the same kind of thing: he won promotional trading contests with gains of around 400-500% and profits of nearly $1,000,000. Following this, some people (actually [I]many[/I] people!) didn’t quite appreciate the difference between the “high-risk, profit-maximisation success” of winning competitions and the “risk-management, safety success” of retail trading, and were foolhardy enough to invest on the strength of his competition success in his “managed fund”, and lost all their money (there was litigation about it - it’s a fairly well known story).

And again, in July 1988, the Larry Williams Financial Strategy Fund was launched, followed in March 1989 by the World Cup Championship Fund, managed by Larry Williams, Jake Bernstein and two others. The 1988 fund lost more than 50% of its clients’ equity in barely one year, as reported in the October 1989 issue of [I]Futures[/I] magazine. The 1989 fund also lost more than half of its original equity by May 1990. This surprised and disappointed the investors, of course: [B]they were people who had become impressed with him based on competition-success[/B], and they didn’t quite appreciate that competition success is absolutely [B][U]no[/U][/B] indication of anything other than being able to win competitions (often with large numbers of entries!). :23: :58:

What impresses some people is rather a [U]red flag[/U] to others … I’m “just saying” … think whatever you like about Nial Fuller, Norm, but for myself, it isn’t logical at all to be impressed with him as a [I][U]teacher[/U][/I] because he’s won a competition - the two things are unrelated! :8:

38

Had to laugh at this.

I so agree with you on this. Everyone is a scalper IMO even these lofty folk that only look at 8hr and day charts because ‘that is where the most reliable signals are’ and because keeping trades open for days is ‘the proper way’ and defines you as a true trader. Load of crap. compare any chart on the day and then the minute chart and you will see exactly the same movement and signal opportunities. People want to look at day charts and take one trade a week - goooo for it. They are not mentally suited to watching quicker timeframes as it fries their brain circuitry. They have exactly the same odds of success as playing the minute chart because this is not about getting the perfect setup where the angelic choir is singing, trumpets are blowing, you are bathed in the warm glow of absolute certainty. I mean imagine waiting days for the perfect setup which you take and then BAM you get roasted. Try get back on and BAM youre roasted again.
Id rather play on the lower time frames where I can be in and out. If I get a string of losses I can quickly analyse whats wrong and adapt to the situation.

Regarding the original question, I dont know if I believe in stop hunting, in fact its irrelevant to me because sometimes it works in my favour and I get a spike that hits my target. When I do get one of those spikes… well it happens and it goes on my spreadsheet. Next trade.

39

I had to laugh at this too.

Your comments are incredibly floored.

40

Just spotted a li’l problem here that we may have overlooked…

Your SL was set at 1.04793 as you say. Highest price on my brokers’ platforms, as I’ve pointed out, was 1.04788 meaning that your broker’s price was at the time 0.6 pips higher @ 1.04794. And as a direct result of this slightly higher price, from your understanding, your stop loss was triggered.

However, even if your broker’s highest price was also 1.04788 it was highly likely if not certain - unless the spread was anything less than 0.5 pips - that you would have been stopped out anyway since your SL @ 1.04793 was positioned just 0.5 pips away from said high.

Note that when shorting a pair the spread must be added to the desired SL level since your SL is in essence a buy order and when you buy the broker gets paid the spread. For example, if you want an effective 10 pip stop selling EURUSD and the spread is 2 pips, your SL should be positioned, at a minimum, 12 pips away from the entry price.

When buying a pair though, you don’t have to make this this provision as you’ve already paid the spread at the point of entry.

42

Ran a little experiment on a 30 trade sample Demo during the week…

2 dice (12)… Every roll 6 or below was a sell signal, every roll 7 or above was a buy signal.

Result (12 buys -18 sells) pure math (chance) gives a close to central result.

Set a position of $0.10 per pip on the hour charts being a 30pip TP - 20pip SL which allows for 12 win to 18 loss break even (RR 1/1.5 with $2.00 risk)

Used 5 FX Majors and 5 FX Minors with a mix of Asian, European and US pairs.

Ok, applied 30 trades 10 on Monday Asian session, 10 on Wednesday during the Euro session and 10 on Thursday evening (Aust Time) the US session.

The results… 29 out of 30 trades stops were hit.

4 trades being stopped out after 1-2 hours (wrong direction).

18 trades closing after 4-7 hours with 5 reaching +28 pips before reversing to stop (volatility).

7 trades ran for over 12 hours ranging around before moving toward the stop and closing (who knows…)

1 trade closed in profit within 90 mins when price spiked up from 12 points away hit the TP and then continued away…

Result -$58 loss against a $3.00 profit…Pure math would give the odds of a profit after an experiment like this with a chance of 15 trades being in each direction, 18/12 losing trades would be classed as acceptable maybe even 25/5 as unlucky… but 30/29 shows…

I am going to run this set up each week for the next 4 weeks…

43

Just want to make sure I’m tracking with you, WTJ, so please don’t take this as insult.

Am I correct that your hypothesis is that with no factor other than chance dictating a position, with SL and TP set at a fixed level (2:3 RtR), a trader would generally be at break-even or close to it?

Basically that the market moves traders to break-even, or that odds are that the market moved traders to break-even?

I think I can predict that your experiment will be inconclusive at best, but will most likely generate very negative results. I would be interested in seeing the results, but I don’t think they would be helpful in proving anything about the broker. Even if true that random chance and market moves will mathematically work out to neutrality, I imagine that it would take a significant amount of time to see that play out.