This works only if the broker does not widen the spread or it does not have an internal price(non-spot forex brokers). If the spread is widened, your SL will trigger and your example Buy position in 40PIPs under market will not be triggered. If the broker widened the spread 40PIPs(don’t panic as this is very general spread for SB companies spread or MM brokers){technically in this example price can come down to -39PIPs while its spread is the only 1PIP, Also if spread widened 40PIPs or SB broker or MM broker have an internal price movement so by 39PIP SL-hunter going down, trigger the SL(as spread is 1-PIP) then reverts to normal 40-PIPs higher}
Above are clear examples of two occasions that your SL will hunt buy your buy position in the example will not be filled at 40-PIPs under the market price.
Assuming it is happening to you there’s only one sure fire way and that’s to trade without stops, How exactly you implement that is up to you. You could base your position size on something other than the usual calculation e.g. based on ATR and then use a mental stop. Or you could again base your position size on ATR and have a hard, but mental, stop in place e.g. $2 000. But let me say this: this is way more of a problem on short term trading vs. long term trading. And knowing what I know: brokers do get blamed and a lot of the time it’s not warranted. It’s the market plain and simple. If anything it’s the major banks in FOREX. Unscrupulous brokers may take advantage of this of course by tearing the you-know-what out of it just because they can and it’s easy to cover up. But it’s not the norm. At least not with regulated brokers (but of course there are regulators and regulators e.g. given the choice between the FSC and CySEC I know where my account would be) (and is).
I wouldn’t go running off and taking everything that’s said as gospel. You know: this guy knows all the secrets. No such thing. And bear in mind he’s trying to sell something at the end of the day (even if it is him just trying to monetize his channel). What I’m saying is just watch with a sort of broad strokes mindset.
Disclaimer: you’re talking FOREX here so what I do know. But if this is the case (and I’ve no reason to believe otherwise) it’s sobering if nothing else. Those COT reports don’t lie (IG providing their version based on their client base is all).
P.P.S.
Not saying the guy doesn’t know what he’s talking about either. But if he’s only HALF right that’s good enough for me and explains a lot when it comes to the FOREX market.
If the firm uses a spread pf 80 pips around the underlying market, no strategy will be a winner. What you say is strictly correct but otherwise academic.
There is another method which, so far as I can tell, @The_Baller is using (I’m sure he’ll pipe in here). Use much wider stops but obviously at the cost of position size. Not a bad thing (especially monitoring his current thread). Point is: that way the trades can be let run until they turn to profit (of course you need to know what you’re doing). Getting stopped out all of the time adds up quick and people that place tight stops don’t really appreciate this. By rights one would be decreasing their lot size after every stop out to be risking the same percentage of their account on a trade but on the next trade. So not only are you losing money but your trade sizes are diminishing as well and you’ll need to make more on subsequent trades just to make back the losses.
This is a similar approach to my strategy. Will have to look at his thread. My issue was too many small trades open at once and have to improve entries.
I’ve come to believe that risk management is a keystone to successful trading and everything else is built upon that.
If you’re using a tight stop loss, you either know exactly what you’re doing and you’re sitting there looking, waiting for the perfect entry or you have no idea but want to make fast money and you can only afford to put your stop loss where you put it, because of your position size and total risk.
If you just look at the bigger picture, its hard to be wrong. Especially weekly and monthly charts.
You can clearly see the support level being tested for the 2nd time. If you placed a -100 (200 to be safe) stop loss in anticipation of a bounce to the upside and just rode it.
You would have made £26,382.30 profit ($34,186.18), albeit in 4 years, averaging $8.5K a year, not bad.
As per my knowledge and what I read in FXpeaceArmy as, from peoples complaints summary, all retail/standard FX brokers can widen spread as much as they want, even 100PIP was a case I read. I’m not speaking about MM brokers or SB brokers, I’m speaking about retail/standard brokers offering spot-forex accounts. ?
weekly or monthly charts are easier to trade,(also consider you will stay with swaps forever until position reach a winning-side/TP) as its easier to drive a car than an F1-McLaren, but will not increase your account size 50% monthly. opening a small position(2% rule) on these timeframes that take ages to reach its TP target is not my approach and will not increase my account size in the rate I mentioned above. I’m looking to successfully reach 50% monthly with reasonable risk. ?
Actually, compared to the big 5 brokerages or most SB firms, some forex brokers are tiny. So yes, maybe they do have to widen their spreads as you’ve heard.
I sometimes suggest that new traders start with the biggest tightly regulated firm they can find and later they can specialise if they need to.
Actually, I’m still not convinced that what some of our colleagues say is correct - that a broker moved their prices specifically to single out their individual stop. I’d like to see evidence.
Thanks for your valuable replies. Regarding SL matter you mentioned, I do trade with no SL sometimes, but some market legends told me ‘without SL everything is wrong’. How can someone be sure that will not affect by StopOut, and don’t use SL at all?
Broker see the positions, SL, TP, orders{whatever is stop/limit,…} and associated TP/SL with them. When a broker is not offering a spot-forex, their internal price can move up/down and spread can get widen on top of it(if required or wanted so). Speaking generally involving a regulation authority do need a solicitor(paying about 8K to a business solicitor?), or the regulation does reply by email and can involve and investigate and give a written/email answer, on a single position inquiry?
Yes, the firm can widen the spread at any time. They commonly do this to reduce risk to their own capital, but they keep the wide spreads as narrow as possible because the wider they re-set them, the more clients notice and the more likely they are to simply walk away to another firm.
But novice traders will always try to tell us they are only losing because these corrupt firms are constantly stop-hunting to swipe a measly 50 quid off them when they’ve gone for 2 minutes to get a coffee.
But excessive widening of spreads carries its own costs and risk. So, OK, let’s assume they aggressively widen the spread without justification in mid-session. The trader’s stop is 40 pips below market and they widen the spread to 80 pips to swipe his rotten 50 quid. What about all the TP orders on the other side of the mid-price? They may get executed at +10, +20, +30 or if they’re lucky +40. These orders need not be pre-set, the traders watching the spread just hit the close button and walk away with a free gift.
Then the spread comes back to 2 pips as usual. But meantime of course there could also be entry orders that get filled as well as live entries that are clicked when these other traders see the spread go to 80 pips. What’s the point of taking out someone’s measly 50 quid when doing it leaves the firm exposed to an unmeasurable risk?
Best I can say to anyone from forexpeacearmy who’s been hit by a sudden 80 pip spread is that they should have studied their craft a bit better.
Allow me to dispel yet another myth that’s still perpetuating these forums (I thought it would have gone away by now) (and why am I always being the negative one!!! LOL!!!):
This business of NDD or ECN brokers. Hate to you tell you all: but if you think your little 'ol 1 lot of EUR/USD trade is going to some big market maker or the Interbank you are SORELY mistaken. Retail brokers work with risk management systems. So by some fancy processes in place they know at any given time what their risk or exposure is to clients based on aggregated positioning. Once that risk reaches whatever predetermined level they then hedge their exposure to a bigger MM and so on and so forth. Bottom line: in the retail FOREX market the chances are 99% that your broker is ALWAYS on the other side of your trade unless you’re trading big (and in which case you’d probably not be trading with some bucket shop in Belize or Cyprus). And that is why is REALLY important to choose your broker VERY wisely. (And wiling to bet that most all of our new and budding hopefuls around here don’t even know what the term “bucket shop” refers to or know of its origins).
I note that not a single person has even bothered to look at that video posted. Tells me that some are not really here to learn or get advice i.e. not hearing what they want to hear. Please believe me when I say that I (like other with a little bit of experience around here) don’t just post about the negative aspects of this business simply because we’re miserable sods I assure you.
Anyway and moving on: I thought I’d attach the below for fun (have had it around for years i.e. I see the original site on where it was posted some years ago is no longer). Basically: traders are no walk in the park either when seen from a broker’s perspective!!!
Hmmmnnn… Was just reading through some of the other posts. So notwithstanding my post above: of course you’re also welcome to trade with brokers that offer fixed spreads. Problem: the spreads are usually a lot wider and our average budding FOREX millionaire who is intent on trying to scalp could not trade with wide but fixed spreads because his scalping system would not be viable under those conditions. So the much cheaper variable spreads are chosen. Great when there’s no volatility. But when there is then what???
Contrary to popular belief: brokers have to make money too. They’re not providing a free service out of the goodness of their hearts I assure you.
May or may not make you feel better: right now a single position on the SPDR SP500 ETF would cost me $57 (spread). You’re not that badly off I assure you. This last statement being made: I pay it gladly given what I get in return from my broker i.e. no hassles or issues.
Correct position sizing for one i.e. not over trading your account. Mental stops also maybe. Not for everyone though. Mental stops also FAR away from price as noted by more than one person here. Mental stops not for everyone though i.e. very hard to force yourself to close a losing position. Tendency is to hold onto it in the hopes it will eventually turn around if only to break even. You gotta test your trading system and know it WELL.
If you mean Soft-Stops, how do you prevent events like CHF historical fall overnight? I’m not saying the Soft-Stops is incorrect either. My goal is concluding in the best technique.
Hmmmnnn… Therein lies the problem I’m afraid. Not even stops would have been honored during that move. And not simply because the broker is at fault. There would simply just not be enough time for a broker to execute a stop at the given price. The price of your stop would simply just not be available to them in the market to process it. But now with a very wide stop and a smaller position size: chance are you’d still have taken a loss but something you’d be able to recover from in a few trades. But those guys that had their stops close and maximum position size would have gotten nailed. It just is what it is I’m afraid.
