What’s going on here with the EURUSD - stop hunting perhaps?
I was fully expecting the bounce back though it looks like some congestion at the line.
If it was stop hunting by any nature if would probably have been followed by a larger downfall. Price tried to break and it failed to do so. Same thing happened with USDCHF last night. Broke out last night, and dropped some pips. Before going right back into it’s range bound pattern.
Its stop hunting only if every broker in the world is doing it … which then doesn’t make it stop hunting as there would have to be opposing positions to fill.
What is happening is this …
Prior to the FOMC decision there was some good news in the eurozone (consumer confidence) that pushed strengthened the euro currencies leading up to Wednesday afternoon.
The FOMC statement caused a bounce … largely do to profit taking by the longs from the previous two days.
As the currency dropped, the longs got back in … another bounce.
Then, the Fed and Treasury got involved. They want EURUSD in particular to be range bound between 1.34xx and 1.31xx until June.
Then, if all goes according to global economic plan, sometime probably in July the dollar will begin to strengthen. By August/September EURUSD should be in the 1.21 to 1.17 range.
Why is this a GLOBAL economic plan?
Simple … the world knows that for the global recession to end, the US will have to lead it because we are the world’s largest importers.
August and September is the buying months for large retailers for Christmas (October gets thrown in there too, but that’s getting to the end of the buying months).
A strong dollar will mean that the retailers can buy more while selling for less (good for the US economy which right now is DEPENDING on christmas good news going into 2010) … it also means more goods sold to the US from other countries, which is good for them.
In short, THE PLAN is to see a strong dollar at least during the “buying season” for Christmas (which is of course many months in front of the actual event).
Now, this plan could possibly be derailed by continued incompetence from Bernanke/Geithner (both of whom have left me STUNNED by things they have and have not done).
The other thing that could derail this plan is Obama’s economic plan. He plain and simply CAN NOT continue telling the world he is going to spend additional trillions on additional programs if he has ANY HOPE of seeing a strong dollar.
Sadly, I hold no hope for competence out of Bernanke/Geithner nor do I hold much hope for Obama keeping his mouth shut about his spending plans.
So what does all of that mean …
It means to expect EURUSD, and in fact most of the dollar denominated currencies, to be jittery and range bound.
Global banks and treasury departments will likely attempt to force a dollar to strengthen … but even they can’t manipulate the dollar across that many currencies for that many months, especially not when there is SO FAR to push the dollar to get it where they would like it to be.
The only hope for that to happen will be other governments to begin bashing their own economies in an effort to make the US recovery look better by comparison … here again, I won’t hold my breath.
So, repeating what I said earlier … jittery and range bound for the dollar.
Then, the Fed and Treasury got involved. They want EURUSD in particular to be range bound between 1.34xx and 1.31xx until June.
Why not strengthen it now if that is their plan? 
So, you think the treasury sold off a load of euros/bought dollars upon the breakout?
It pproached the 38.2% retracement of the day�s trend like range.
The 38.2% retracement comes in at the 1.3257 level.
As a result, this level will be eyed as support. A break should signal a period of consolidation or decline from the recent move higher.
Here is a chart of it
Ok but it’s in a downward channel at the moment. It may have support at the 38.2 but that would imply it’s a small consolidation before a continuation. The only way to continue is to try for another breakout, which it has already hit resistance at. Plus the downward pressure of the channel still looming.
If it was a retrace from the last low at 1.2963, then it’s not at 38.2 as it broke through it, returned, broke through it, and is now there but that’s the overnight lull.
The daily candle shows an shooting star but not yet the confirmation candle.
?
Governments can move enough currency to, during a VERY brief period, manipulate prices. Therefore, if they are going to push their weight, they need to do so much closer to when they want a strong dollar. If they tried manipulating the currency now, they’d exhaust their ability to do so before August/September.
Eh?! Brokers have customers & customers have stops…
That’s true. But “stop hunting” is when one broker manipulates prices on their own exchange in an effort to trigger stops.
When prices on every broker and every platform change at exactly the same rate and pace (as we have seen over this week), that means that people getting their stops hit have simply misjudged the direction of the market … NOT that every broker in the world is stop hunting.
Assuming that every broker in the world is stop hunting at the exact same rate, pace, and time would assume that there is a multi-trillion dollar PER DAY worldwide conspiracy by EVERY broker in the world WITHOUT exception to bilk people AND GOVERNMENTS out of their money.
You’d have to assume that every hedge fund, bank, and private equity firm in the world was willingly allowing their money to be stolen.
You’d have to assume that every broker in the world was willingly a part of this conspiracy and that NOT A SINGLE ONE OF THEM was blowing the whistle.
It would be akin to assuming aliens built the pyramids.
Stop hunting in this day and age of electronic order completion and no dealing desks is as much an urban myth as the mars close approach in August of this year.
You’ve got a good way with words … but that’s all I agree on!
Manipulation of price like you’re talking about is pure bucket-shop behaviour, and any broker that constantly tries it gets found out pretty quickly in this day and age.
Stop-hunting is trading to trigger stops, and then use the resulting volume to leverage in your position or simply take profits. It’s not illegal in FX, it happens every day and it’s well known. Brokers throw in volume to trip stops of their own customers during thin liquidity, hedge funds use privileged order flow information to find out banks of stops so they can get in without price moving against them and so on.
Prof. specs don’t place their stops with their brokers; they call them in for this very reason. Trouble is, here on babypips, everyone thinks it’s a conspiracy against them personally - it rarely is for the peanuts they’re trading. Take GU for eg. Right now, there’s a tons of stops at around 4937 above, guaranteed. The majority stick them in exactly the same place - just beyond S/R and/or recent highs/lows - and the majority lose.
Actual stop hunting, and I mean the broker fraud that people complain about … is easily provable because one brokers prices will have a spike that doesn’t correspond to prices market wide. What you are talking about isn’t the kind of fraudulent stop hunting people are complaining about, allow me to explain …
Stop-hunting is trading to trigger stops, and then use the resulting volume to leverage in your position or simply take profits.
To do this would take an ENORMOUS amount of money. FXCM, IBFX, DBFX, Oanda … maybe those guys could do it because they have billions to throw into a pair to force a couple of pip move in a currency. But keep in mind that the currency has to get close to the stops to cause this to happen in the first place, and no one broker is big enough to force a 30 to 50 pip move in any of the larger G7 pairs.
Stop hunting on the level you are talking about however often is NOT done by brokers, but by institutional investors (who will call each other and work together by the way) who have data feeds giving stop positions and amounts of those stops. So, they will do it, forcing a large number of stops to trigger … pushing the currency even farther in their favor as they slowly exit out, taking profits along the way.
Again, it’s institutional investors doing this, NOT brokers. Keep in mind that a broker WANTS you to keep your money and keep trading with them. It is trading activity by retail speculators that makes them their money, NOT trading themselves or else they would just start a hedge fund and then not have to worry about some idiot complaining about stop hunting when their trade size is only a few grand (or even just a few dollars).
It’s not illegal in FX, it happens every day and it’s well known. Brokers throw in volume to trip stops of their own customers during thin liquidity, hedge funds use privileged order flow information to find out banks of stops so they can get in without price moving against them and so on.
There are perhaps a dozen brokers large enough to do what you are talking about. The problem with your belief that brokers do this is in your assumption that they somehow gain by it … they don’t. Busting trading accounts of speculative traders does NOT improve their business, it hurts it.
Prof. specs don’t place their stops with their brokers; they call them in for this very reason.
No … they don’t “call them in”. I work with professional traders day in and day out. Not a single professional trader I know would even CONSIDER using a telephone to exit a position moving against them because it’s too slow.
Stop positions and profit targets are entered into the software on their own computers and positions exited that way (either at a loss or at profit).
I think you’ve got some wires crossed. I didn’t mention retail brokers at all - FXCM, Oanda all of them, combined have what, 2% of fx turnover? Collectively not enough to move much at all, and even then they’d all have to work in collusion.
T1 brokers however are a different kettle of fish. These can and do, hunt stops. And sometimes yes, it’s institutional investors as I mentioned. But like I said, they’re not manipulating price, they’re actually trading to reach those stops.
As for calling in stops - no that doesn’t mean they have to use a telephone. It means they have someone mechanism for monitoring the market to take them out of a position when it reaches X, which then contacts their broker to get them out. Person, phone, computer, fax, courier pigeon, the point is, the order doesn’t sit with their broker.
Okay, I’ll concede some of your points. The issue of “stop hunting” kind of gets my knickers in a bunch because I’m so sick of hearing it in relation to retail brokers. Right here on this board is a post of someone asking about Oanda in relation to stop hunting.
However, I’m utterly unconvinced that we are seeing stop hunting with the currency this week. If we were we would not be watching this ping pong bounce going on across a 100 pip range.
We’re seeing a classic range bound situation, not stop hunting.
True on all counts. Oanda don’t need to hunt their customer stops, most customers manage to crash and burn without any assistance - and like you say, it takes about 1 minute to compare the price with other brokers to see if they’ve been picked out for special ‘treatment’.
There’s another thread somewhere saying how they don’t place SLs to stop Oanda stop hunting, which is almost as ludicrous given the size of their trading accounts.
I don’t think EURUSD is stop hunting either btw - 100 pip range stop hunts would be stretching anyone’s pockets. I’ve just seen it on odd occasions with news and spikes up when price is very near to obvious levels.
And on a slightly related topic … for the record, Brokers get NOTHING out of it if one of their traders makes bad decisions and busts their account.
In fact, retail brokers would MUCH rather that their traders be successful and continue trading so that way they can keep getting the spread money flowing in.
My jury’s out on that one. It seems good business sense to keep the spreads rolling in, but then I see things like the King of the Micro competition at FXCM, actively encouraging chronic money management. And massive leverage offered to retail too - doesn’t exactly scream long term.
It’s almost like they’d like customers to be profitable, but accept they won’t so churn 'em and burn 'em as fast as possible.
Maybe I’m just too cynical.
I will agree with you here. Allowing 400:1 leverage on an account with only a few grand doesn’t seem as if they’re interested in traders being in it for the long haul. Their business model obviously is designed so that they (the broker) benefits from long term profitable traders … but they do sometimes act like:
Well, we know that 98% of all traders are going to lose their shirt anyway, so why bother trying to prevent it.
The Euro (EUR/USD) the Euro moved advanced during the Asian session, fell down at the London open, recovered and then fell down in the US session, finally ending the day slightly higher. Volume was low as of the bank holiday in most of Europe and the pair managed to hold more than the 100-day simple moving average. Today, there was a no Euro-zone economic release.
Hi,
I hope someone could give a brief description of how institutional traders actually “stop hunt”. Legally, I hasten to add.
I have done a Google search on this subject but I am not really getting the [B]mechanism[/B] of how they (institutional traders) do it.
Let’s give an example:
(a) A currency pair (let’s say XXX/YYY) has been on an uptrend for past few days.
(b) I (an institutional trader) ‘know’ that over these few days, many retail traders have placed Long orders. I further ‘know’ that many of the Stop Losses of these retail orders are just below the price level of 1.3000 (in the range of 1.2980 to 1.2999), while current price is 1.3030.
Question:
[B]Exactly[/B] how do I (an institutional trader) push the prices to below 1.3000? Do I use my tons of cash to keep selling the currency pair (currently at 1.3030), hoping to drive its price down to below 1.3000, thereby triggering those retail Stop Loss orders (which are Sell orders), thus creating a (temporary) downward momentum which allows me to close my Short positions that I had entered at 1.3030 level at the levels of 1.2980-1.2999? If this operation is successful, then of course I will make a quick profit of 30-50 Pips. Is [B][U]LEAGL[/U][/B] Stop Hunting as simple as this!?
What happens if my selling with is met with buying from other equally rich (or even richer) institutional traders? Then the price will not move down to below 1.3000 and I will obviously be sitting on big losses. Or do I, obviously, have to have a (secret) agreement with several other institutional traders to conduct this operation?
Please note I am asking more for personal knowledge/interest. Something like ‘Forex trivia’ question.
Thanks.
It is done by buying (or selling) more than there are current bids/asks for. That will push the currency pair in their desired direction. As stops are hit, that accellerates the “new” direction. Generally, as soon as stops are hit these institutionals will start to “peel out” of their large open position, using the triggering stops to keep the pair moving while still allowing them to exit.
HTH