Faking out your brokers stop hunting

Beginner Questions
#1

This thread isn’t about wether stop hunting, by your broker exists or not. This thread assumes that they indeed do stop hunt and try to fake you out of your TP points. And that they have programs to track your habits and where you usually put stop and TP. (So please don’t turn this into a argument about wether it happens or not)

I’ve had some thoughts on how to fake out the stop hunting and TP broker fake out. I’d like to put my thoughts down and if anyone has thoughts about it, or even first hand experience please chime in.

I’ve had trades come within pips of my SL and then go my way. I’ve also had trades come within a pip of my TP and the reverse hard back. While I don’t think it’s always the broker stop hunting, my ideas i’m forumlating would probably help anyways.

Here are my thoughts on how to avoid getting stop hunted. Some of this is borrowed from nickB.

  1. Good entry…( of course.) do your best to make your entry somewhere where momentum will take it in your favor, or at the very least have price rest without going negative, before going postitive.

  2. figure your SL mathmatically somehow off of the daily range of the pair, NOT just what you are willing to lose. Say your pair moves about 100 pips in a day, if it’s already moved some percentage of that, it hard to move price back across the whole daily range.
    Nick B uses 50 or 70 pips on GBP/JPY

  3. Make your SL larger than your TP. This makes it more probable mathmatically that your TP will get hit…if your entry is good. [B] ( A tight SL and a large TP is a recipe for getting stopped out often and losing a lot of trades) [/B]

  4. Don’t place a SL or TP at all. Place alarms x amount of pips before where you want to stop out if the trade doesn’t go well. What this allows you to do is watch price action and use your brain to decide if you think the trade will go back your way or keep taking your pips. This goes hand in hand with momentum and entry. If you placed a good entry and get momentum, you’ll get a nice easy trade that goes your way, right away. But, often price will range and even spike before ultimatly going where you thought it would in the first place.

Now this take practice and an objective mindset. If you find your self not being able to read price action well, or hoping and preying and just letting it fly past your alarms, then you are better off with an automatic stop loss.

You can also use an automatic, “O CRAP SL,” that is larger than your actual manual SL. This way you have a something against a huge spike or internet outtage really hurting you.

  1. Now to fake out the stop hunters I’m thinking it’s best to put odd stops in where you know they don’t have a chance to get hit anytime soon. Then take them out again. Then put a completely different one in. I’m thinking no way they have a person monitoring traders, they probably have some sneaky little programs that log everything you do. So, not only will I put in odd stops, but I’ll take profit at different levels all the time and even put in TPs I know won’t be hit. I’m thinking if they have bots collecting info and messing with you, this would be a good way to screw up their data.

  2. No automatic stop loss or take profit. As soon as the trade goes postive by x pips move the SL postive. If it goes bad manually close or put in SL after price has passed an alarm.

  3. The easiest way: Trade such a small percentage of your account that you can wether huge drawdown and hold on to trades if you really think it will eventually go the way you thought. Not really good trading, but the easiest way to avoid stop hunting.

#2

Ummm…If you take the view that your broker will run your stop if given the chance there are only three ways to avoid it happening:

  1. Don’t trade.
  2. Don’t use stops.
  3. Put your stops so far away as to be unreachable (which is really the same as #2)

Nothing else matters because you cannot consistently make trades which don’t go against you at some point and if you don’t put your stop way outside the realm of reason it’s going to get hit one day when things are unusually volatile. Imagine how many stops got hit during the Crash in 87, ones that traders probably thought were reasonably far away.

#3

I use the oh crap stop loss method now and base my risk on that…say 70 pips. I will close it out manually at 50 if I think it’s not going to come back my way.

“And that they have programs to track your habits and where you usually put stop and TP”.
If they do it they don’t pick on 1 person lol, imagine how many retail traders there are. They would have to spend millions designing this software or paying an analyst to figure what method your use, if in fact you only use 1!!! They do track where the large majority of their stops are but you don’t want to get into this anyway. The broker relies on not making you go bust.
As someone else said in a thread, they have never seen a broker’s price differ by more than a pip or so between that and the interbank price and this is usually caused by a millisecond delay.

#4

Ya, but it would be a simple matter for them to have a program that logs all your data from trades and mark how many pips your TP and SL’s are and if they are consistently the same. They wouldn’t have to know what system or method you are using.

The old nugget comes to mind, “Just because I’m paranoid doesn’t mean no one is after me.”

#5

Why would they pick on you?
They can’t move the market 50pips :slight_smile: They can barely move it 1 or 2. The banks can though.
The advice on stops is good though but newbies should use them to stop emotions getting int he way. Hence the Oh crap stop loss.

#6

I don’t think they pick anyone. If anything, I think they just run a program that collects data and responds accordingly.

I’m kind of in a, “prepare for the worst, but expect the best,” mindset with this thread.

#7

HI:

Please explain what is the (You can also use an automatic, "O CRAP SL,"):confused:

Thanks

#8

It’s often referred to as a “catastrophic stop-loss”, that is, a stop-loss placed outside the normal range of price movement, to protect you from a catastrophe. What sort of catastrophe? Loss of electrical power, loss of internet connection, a major terrorist attack, a major natural disaster, etc. — anything capable of blinding your trading platform, or suddenly moving the market far beyond what you consider to be its normal range.

A scalper or active trader, who actively manages his/her trades and intends to manually exit every trade, might place a catastrophic S/L at 50 or 100 pips away from entry price, “just in case”.

#9

You place a stop loss further out than where you actually want to stop. This is to keep losses from getting out of hand in case of a spike or very quick move or internet outtage.

So, say you wanted to a SL at -50. Instead of putting it their you might put it at -70. That would give you some leeway when it approaches -50 to watch price action and use your own judgement to decide if price is just retracing a bit and will go back to your enty and TP.

The point being that automatic stops are mechanical and will take you out regardless of the price action. You’ll often hear traders complain they were stopped out and then price reversed and went to their TP from their stop.

So, your real stop might be at -50 but that would be on an alarm, so you can decide to close yourself, if you decide too. The, “o crap,” SL. Is just that. "O crap I was wrong and price kept going crazy fast past my alarm. Or, my internet went out. Or, I was away from the computer dropping the kids off at the pool. Good thing I put an automatic SL, so I didn’t get hurt too bad.

So, far I’ve found it helps to fend of retraces taking you out. The downside is that you have to be there at those times to manage the trade. Just set alarms at price points that you want to be watching. They are quite easy to set in MT4. Just set a price, less that or greater than and bid or ask. I already work from home, so I’m usually within skipping distance of my computer at all times wether I’m trading or not. I just pump up the speakers and when it hits an alarm, bong, bong, bong. I think you can set it up to e-mail you and alert your cell too. I need to get a cell, so I can have it alert me in the wee hours of the mornings, I’ll catch more trades.

You are running the trade off of what is actually happening and not off indicators or predictions that can’t possibly account for retraces and actual movement between point A & B. In other words you are using your own brain and judgement.

#10

Thanks Clint, I forgot their was a more used, gentile term for it.

#11

Thank you Clint:)

#12

It’s possible to completely hide your stop-loss (S/L) and take-profit (T/P) orders from the market, and STILL be a victim of stop-hunting. If your “invisible” S/L’s and T/P’s are placed at the same price levels where millions of other traders have placed their “visible” S/L and T/P orders, then you will get hit right along with them, when the banks go stop-hunting. They’re not hunting you, or any other individual trader, specifically; they’re hunting clusters of pending orders which they can trigger, to their advantage.

So, the lesson here is to avoid those areas — like 3 pips above or below obvious resistance or support levels — where the masses are likely to place their stops.

How do you make your S/L’s and T/P’s invisible to the market? By trading with an STP or ECN, which:

(1) does not create Bid and Ask prices (i.e., is not a market-maker), and therefore cannot gun stops in their own order book by manipulating the spread,

(2) does not trade for their own account, and therefore cannot trade against you, and

(3) holds all of your pending orders, including your S/L’s and T/P’s on their own servers, so that they are not seen upstream.

One broker which meets all of these conditions is MB Trading. There may be many others. If you want to pursue this, you can start with these lists of STP brokers and ECN brokers:

STP / NDD Forex Brokers

ECN Forex Brokers

Clint

#13

Thanks for the insight clint.

I’m with IBFX now. My first and only live broker, but what I have experienced with them is that I think they are fair and really don’t stop hunt. At least not at my pip squeak micro account level of trading. But, like I said best to prepare for the worst…

I’m just waiting for MB to go live with MT4. I keep checking their site every day. The features make me drool. Having no proximity to price limit as to where I can set a exit makes me drool. (does that count for stop losses as well, if setting them postive?)

With IBFX I have to wait for the spread to clear my target TP + 3 pips, before I can set a SL postive. What a pain in the butt.

#14

Hey, Phoenix

If there are things about your current broker which annoy you, don’t be too quick to jump to another broker. If you do that, I promise that you will discover annoying things about your new broker, which you never anticipated.

I agree with you that MB Trading is a very appealing broker. But, there is one thing about them which really turns me away: their weird and clumsy order types.

Just one example. Instead of placing a market order together with a stop and limit, as you do with most brokers, at MB you place what’s called a Market+TTO order. This is a market order flanked above and below by pending orders to exit the trade.

So far, this just seems like different terminology for the same result, right? Well, the problem is that when one of those flanking orders is hit, you have to manually cancel the other order; if you don’t manually cancel it, and it later gets hit, it will create a new position opposite to your original position.

In other words, most brokers’ stop-loss and limit (T/P) orders are OCO (one cancels the other); but, this is NOT the case at MB.

Altogether, MB has 15 different order types, and learning to use them quickly and efficiently is no small task. If you jump into a relationship with MB Trading, without knowing any of this, you might regret it.

I opened a demo account with MB about 3 years ago (their order types are the same now as they were then), and I gave up on it after a few weeks.

But, it’s entirely possible that MB is all wrong for me, and exactly right for you. Only you can make that determination. Due diligence, as they say.

Before opening any account (live or demo) with MB, you can study their order types (and all of their other features) at:

MB Trading - Stocks Options Futures Forex Online Discount Trading then click on the “Order Types” video tutorials.

Clint

#15

I have always advocated a PCI stop loss on my candlesticks threads.

PCI = power, computer, internet.

If any of these go down, the PCI stop loss will take care of you.

It is correctly set at certain candlestick points and just outside the relevant Bollinger bands.

The risk/reward ratio is preserved and the stop loss points are outside the usual hunting points.

The set up is just perfect for my candlesticks method.