How to avoid getting nabbed by stop hunters

I presume the concept of traders seeking out stops is not just folklore. I can’t monitor all my trades by the minute which is causing me a problem. Yesterday was a good example. Sadly two good(bad) examples.

In both cases I was sitting on a trade where the PA was really going nowhere except sideways. When I came back I’d been stopped. When I looked more closely there was a 10 min candle where the price had dropped by 30 pips and then gone straight back and carried on idling for another hour. It was the wick what done it not the body and looking closer it looked like a one minute candle. I had the same thing happen in the other direction in the other trade.

Perhaps I’m just not used to the behaviour of USD/EUR and GBP/JPY… Certainly spoilt my day as both trades would have worked in my favour if I hadn’t been stopped out. At least I had the sense to turn off the trading sw and walk away.:cool:

So a more general point - is there is a strategic way to place stops or is it defined by PA at the point of trade and your risk management ?

E/U behaviour is changing. Firstly because of Gold PA and secondly because of USD Carry Trades.

It is defined by PA and individual risk management. From a strategic point of view depending on TF you’re trading you could place your stops below/above major S&R levels and/or use ATR readings.
If you trade E/U it is helpful to keep an eye on the Gold chart. What happened with the E/U yesterday afternoon NY time had it’s cause in Gold PA.

The best way to avoid stop hunting, especially on smaller time frames. Is to have the stop placed somewhere that definately means, “the trade is no longer valid and definately not going the direction I thought.”

Too often people put their stop closely on the outside of S&R. You are just asking to get spiked out.

Just because price hit these S&R points in the past and reversed is no guarantee they won’t hit this area again but wider and more radically, and it’s not always a stop hunt, its just price doing it’s thing.

One thing that works well for me is to simply draw and equal distance channel around price for as long as I can. The stop is anywhere from 20-50pips outside that, depending on the pairs ATR.

That gives me a hardstop that is usually the end of a trade being valid.

It may be wider than you like, but you don’t have to hold on to hard stop. If you look at other things to show you direction you can get out earlier manually, but that will help with gettting stop hunted and spiked out.

Agreed - the ATR is figures very importantly in determining where to place a stop loss.

That gives me a hardstop that is usually the end of a trade being valid.

I like the term “hardstop”!! :slight_smile: :slight_smile:

If you can see that your trade is a loser before you reach the “hardstop”, so much the better.
Then you close early and lose less pips. :smiley:

I’m still waiting to see (hope I never see it) a graphical example of stop hunting proof. A comparative among different broker’s charts that show considerable differences to say that the broker has been squeezing you.

In my early newbie days I was so terrified for stop hunting stories that I thought that it would never be possible to succed in this business.

Now I know the only thing I (we) have to be afraid of is the lack of expertise and the lack of emotional control.

Knowing where to place stop losses is a very crucial ability in trading. You can turn a very profitable system into a loser one by not knowing how to manage this aspect.

Depending on your method and timeframe you should be able to identify a point where you can tell that your trade is already gone and price is not going back. You can use fib levels, crossovers, candle’s wicks, it totally depends on your style.

My thoughts are, (and I appreciate your comments in this regard) that a risk reward ratio of at least 1:1 is the only way to go. Otherwise one loser can take away the profits of many past trades, and that eventually is going to kill your account.

It’s my understanding that stop hunting happens, BUT, it is not your broker. (unless you trade with a scammy little bucket shop)

You are being stop hunted by institutional traders trading much larger accounts for much larger companies. Just by looking at the same things that retail traders do, they know where most of the stops are. They can’t make it spike horrendously, but when close enough they can put enough pressure on to trigger your stop orders and make themselves more money.

Stop hunting is a legitimate form of trading, think of it as the darkside of breakout trading. Price goes up to an obvious support where lots of stop are at, then is pushed up and takes out all the stops, then you get in on the freefall as price goes away from all the stops taken out.

How does your stop getting hit make money for the institutional traders?

I don’t get it… How does one trader losing money make another trader gain money? I can understand if it’s your broker doing it, but not other traders. :confused:

will trading through ECN brokers reduced possibilities of stop hunting? :confused:

Yes I’ve been aware of that. But I consider it as a “normal” market behavior that can be handled. On the other hand what I meat in my prevoiusis that still many people say their broker does stop hunt them. While this may be true with some brokers I still haven’t seen such an evidence of that undesirable practice.

I know maybe it’s not the topic of this thread and I’m posting something completely different of what rmj cemik had asked, but I know that many newbies read this kind of stories or get caught by a thread’s title, and some can get really discouraged to keep going on

I’ve been there and I’d missed a once in a lifetime opportunity if I’d surrendered to those horrible stories.

Hi Caesar95, in theory i guess this is the case, but in practise, (I’m being repetitive in here) I haven’t seen evidence of such a practice from a market maker.

Me have never seeing it, doesn’t mean It doesn’t exist. But from the tons of reviews/complains that I have read, none of then have been able to prove it.

I guess if you go with a reputable broker you’ll be fine.

I agree.

In fact you can profit from it handsomely once you have figured out the underlying dynamics like WHEN it’s done, HOW it’s done and WHAT time and day of the week/month it’s done.

For instance in Crude Oil it’s done on a particular day of the week [U]one minute before and one second after roll over time[/U].

The potential profit ranges from 40 pips to 200 pips in a matter of seconds.

They push price one way to trigger the stops, then make money on the reaction that happens because of all the stops being tripped, which is another movement.

No way it’s any reputable broker. It would be so easy to prove it wouldn’t even be funny. All it would take is one chart that didn’t match within an acceptable percentage to the other brokers feeds and someone who lost a good amount of money thats willing to take 10 minutes to prove it.

I’ve traded live in a few trading rooms, where someone posts their brokers charts. Dozens of traders with different brokers, and we all have extremely similar price charts.

All the brokers would have to be in an extremely closed mouth conspiracy to all do it together, lol.

Brokers stop huntings is basically what traders cry when they lose their first big trade or entire account and don’t want to admit that they just don’t know what they are doing.

these are players who drive the market (not retail traders or brokers)
hedge funds, sovereign wealth funds, banks, central banks and institutionl traders who often hold large positions for months - for instance - the Reserve bank of Australia was buying all the dollars last year as the currency dropped from 90cents to 60 cents and they held those position for six months and pocket 4.4billion profit recently.

Also last monday, for instance, the players drove the pound down against yen so to make profit for the end of the quarter for the shorts positions the had bought and held against the traders 3months prior - and then a final move was stophunting the long positions of other players before rising price unassumedly - it is a legitimate practice in the market that occurs daily by players forcing price in one direction collecting the stops and moving it away in the other direction.

We are basically just trading the price action against other retail traders - but the market moves are determined by the main players and they are try to out manouvere there competition in earning the money. We are seeing and trading (placing stops etc) the same way the institutional traders are except our orders are not moving price.
Stop hunting will always occur and its part of trading. Often a stop hint is a quick fire false move that spikes up 30-100pips and then reverses for the rest of the session. false moves are usually quick moves you will see

We had a lively discussion on another thread, back in June, on the topic of stop-hunting. Here are a couple of paragraphs copied from one of the posts on that thread:

For the rest of that post, click on: 301 Moved Permanently


The problem is that we do not know when they are going to do.
Given a good entry, we could be caught unaware by their actions.

The only thing we could perhaps do which has already been mentioned
is to place your stop at a more appropriate position. How appropriate is that position is another discreet approach.

Having a good stoploss position would also meant that your risk reward is way out. Its kind of difficult to really have 1:1. Probably more occurance for higher timeframe to have 1:1. If it is of lower timeframe. One must know to get out on a discounted loss when it did retraced. Thats had i perceived.

It should be part of your trading strategy to determine [B]before the trade[/B]
[li]SL depending on your risk acceptance
[/li][li]Re-entry evaluation/ strategy in case you get stopped out

If you get stopped out too often, a review of the risk / reward ratio (and therefore SL level) might be helpful. Under “disciplined trading” risk/reward ratio [I]“plus”[/I] win ratio determine the profit.

“plus” in a logical, not mathematical sense of cause :wink:

What is stop hunting?

The above points are valid.

But what’s discussed in this thread is a little different from let’s say placing SL too close or at levels that leave you “exposed”.

What’s discussed here is the way stops get targeted and knocked out at key price levels by “300 pound gorillas” so to speak to give them an advantage.

If you’re unfortunate to have your SL placed on their path it does not matter where your stop is. It will be taken out. You either get out of their way or you join them but you can’t fight them [to use Clint’s phrase]. Because if you do you’ll get crushed.

One of the worst examples of stop hunting I’ve seen when the price of Silver dropped from $10.22 to $5.46…turn around and moved to about $11.00 a couple of month ago. All within a space of less than two hours.

Also the USDCHF pair should be treated with caution in this respect because of major Hedge Fund involvement and the known “heavy hand” of the SNB and two major Swiss Banks who are big players in the FX market.

Excellent thread and thanks for all the comments. I’ll let you know how I get on taking on the gorillas on Wall Street and at the Central Banks who are aiming at the stops on my demo account :smiley:


you might be in for a couple of surprises. :wink:

A rude awakening once you start trading with real money might be on the cards because it hurts getting hit by the gorillas. Your account might not even survive if you’re not careful with money management. :wink:

Ever heard the term [B]parabolic move[/B]…?

That’s the gorillas coming to get you if you unfortunate enough to be on the “wrong side” with your stops. :smiley: