why to worry about hunting. Actually I don�t get why for a broker are that useful our sl and tp points. As a scalper, I care how fast my platform works and of course, have sl and to to set on
Well you’re right, as a trader SL and TP performance is very important, but there’s a good reason for a broker to care about your SL and TP levels too.
(Someone correct me if I’m wrong on this, I’m very new for forex).
Stop-hunting is price manipulation with the goal of getting you to close a trade. If you have a trade open, you’ve already affected the market. You’re just waiting for everybody else to affect the market in a way that makes (or loses) you some money. If lots of people have trades open, then there’s few people left to actually move the market and things slow down.
If you are trading with a dealing-desk, that broker is playing the market against you, and setting their own rates (as opposed to the inter-bank rates). It is in the interest of the dealing-desk to have high-volatility… volatility means more people buying/selling, and thus more spreads to collect.
To encourage volatility, the broker just needs to trigger your stops by having the price go past either your SL or TP (I don’t think the broker would care which one… I could be wrong though). So, if you are trading with a dealing desk and you’ve told them (via your trading application) exactly where your stops are, it would be trivial for the broker to say “hey, let’s close x% of the current open positions that have a stop within y% of the real rate to increase volatility and encourage more trading” and manipulate the price accordingly.
If you don’t tell the broker where your SL, TP levels are, then they can’t do that quite the same. However, I have a feeling that stop-hunting in the sense described above (looking at your order and “cheating”) is probably illegal (or at least not allowed by licensing/certifying agencies). As a software person, my guess is that they just spike the price up and down very quickly when they need to increase volatility. These spikes wouldn’t affect the average rate, but they will trigger stops, and they don’t need to peak at your cards to do it.
Anybody have any better info on the practice of stop-hunting? I hope I’m not completely off-base here!