When I first poked my nose into this thread, back on June 2, I had not done any stop hunting for several months. So, I decided to put on a couple of stop-hunting trades, following Boris Schlossberg’s rules, to see what would happen. As it turned out, I took 3 trades and all 3 were winners.
On the first trade, I followed Schlossberg’s method exactly, and made 45 pips. On the second and third trades, I added a second simple moving average, the 24-SMA, and a couple of my own rules, and made 15 pips and 45 pips, respectively. Altogether, $1,050 for a few minutes of work.
All of this basically confirmed what I said in one of my posts, which was: I have tried this strategy and it works.
I for sure wouldn’t enter a trade at a round number level just because it was a round number, I’d see what the price had done recently, where the S&R points were, and which way the trend was.
I think you need to re-read Boris Schlossberg’s article. He explains price movement and trend. Where the current price is, in relation to the 200-SMA, defines the trend which this trade must conform to.
As for support and resistance levels, [B]that’s what this strategy is all about[/B]. The target price levels — which take the form x.xx00, xxx.00, or 0.xx00 — [B]are[/B] S/R levels.
Furthermore, trades are entered within 15 pips of these target price levels. Are you looking for other support or resistance levels within those 15-pip zones? If you find any there, I think you can ignore them.
As far as I have seen there are 2 kinds of stop hunting though.
Example 1:
Prices in a downtrend approaches a support zone. You go long with a stop loss 20 pips the other side of the support line. Price is spiked down hitting your loss initiating a sell and price continues down. This is as per the examples given in the article.
Example 2:
Prices in a downtrend approaches a support zone. You go long with a stop loss 20 pips the other side of the support line. Price is spiked down hitting your loss initiating a sell but price bounces up. What is happening here? It is spiking because sellers are trying to push it further down but the buyers are too strong. This is still stop hunting isn’t it?
You’re confused. In this stop-hunting strategy, you trade ONLY in the direction of the trend.
[B]In a downtrend, approaching a “00” support level, you go SHORT (not long)[/B], in order to tag along with the heavy-hitters who are gunning for the SELL STOPS parked around the “00” level.
When the strategy works, the stops are hit, reinforcing the downtrend, and driving the price below the “00” level toward x.xx85.
At, or near, the x.xx85 level, the stop hunters cover their shorts, and they are out.
In a downtrend when the price hits the supposed support level of say 1.6000, we are going short at 1.6015. But there are a load of buyers waiting in the 1.6000 region.
There are 2 types of stop hunting:
Example 1:
Prices in a downtrend approaches a support zone. A buyer goes long at 1.6000 with a stop loss 20 pips the other side of the support line. Price is spiked down hitting the stop loss initiating a sell and price continues down. This is as per the example given in the article.
Example 2:
Prices in a downtrend approaches a support zone. A buyer goes long on the support zone 1.6000 with a stop loss 20 pips the other side of the support line. Price is spiked down hitting the stop loss initiating a sell but price then bounces up. What is happening here? It is spiking because sellers are trying to push it further down but the buyers are too strong. This is still stop hunting isn’t it?
Actually this is for Phil since he has a Oanda account.
If you take the Oanda demo they give you 100’000 units.
To make the demo risk equal to a $1000.- real account would you set the demo account to a buy/sell order to 10’000 units by default and therefore could see how the system works on Oanda?
I just want to get the same % risk ratio between demo and real accounts.
I assume a $1000.- real account is what most people would start out with.
Thanks, appreciate your time.
You could do it that way, just multiple all your trade amounts by 100.
You can also reset the Oanda demo to different preset dollar amounts. I believe $1000 is one of the options.
It’s been over a year since I ran my Oanda demo but I believe it’s in the “Accounts” menu on the main toolbar. It’s called “Reset Balance” or something like that.
Or you could even make some bad, overleveraged trades on purpose to bring your account down to whatever amount you wanted. I actually did that cause I wanted to demo with $50, which is what I planned to go live with.
I found it, had to deduct 100’000 units and add 1000 units again (1 unit =$1 only in US/xxxxxx currency’s of course). Ended up with the profit I had already in the account except now it will be more real.
I did not fund the account yet because I need a different demo account that has the same timeframe (GMT). FXDD is not GMT and is 4 to 6 pips off to Oanda quotes.
This would have worked on GU 1.6 the other day. Thinking I might look into it a bit more. Would you call these major levels?
1.1, 1.2, 1.25, 1.3, 1.4, 1.5, 1.6, 1.7, 1.75, 1.8, 1.9, 2.0
Same for fiber
JPY pairs I’m guessing 100, 125, 150, 175 but could include all the others in between?
I would guess once price has been to one level, you wouldn’t want to tarde that level again until it had at least moved to another.
I’m also thinking best tried on the majors where stop hunting is common and traded more heavily?
If you won a trade on this at say the 1.6 pysch level, I’m guessing you wouldn’t place another trade at that level for what…a few weeks? …or maybe until it had reached a new psych level or price had moved away by a few hundred pips?
I mean…you’re suggesting here that the psych levels are every 100 pips with 0.xx00
I’m also thinking best tried on the majors where stop hunting is common and traded more heavily?
Simple rule to build into your system, do not place trades in the same direction price is moving with-in 100 pips of major S & R levels… wait for the break or bounce
An example?
The method above relies on placing trades around pysch levels, which the price is almost certain to test.
I’m not sure 1.xx00, eg 1.6100, 1.6200. 1.6300 etc count as psych levels whereas 1.6000, 1.7000, 1.8000, etc. do. Perhaps the half levels within each one 1.65, 1.7, 1.75, 1.8, 1.85, etc.
When you started this thread, the subject was basically: How and why brokers engage in stop-hunting to rip off their customers.
When I joined the discussion, it was to make the point that most stop-hunting is done at the bank level, not the broker level; and to offer a link to Boris Schlossberg’s article on how ordinary traders can anticipate what the stop-hunters will do, and trade along with them.
The Schlossberg strategy is very simple. It identifies [B]the round numbers which occur every 100 pips[/B] as potential stop-hunting targets. For most currency pairs, these numbers take the form 1.xx00 or 0.xx00. For yen pairs, they take the form xxx.00. Schlossberg doesn’t break it down any further than that.
Schlossberg didn’t say this, but I think it’s obvious that 1.x000 is a more important round number than 1.xx00. And I think it’s probably true that 1.x500 is a more important number than 1.x400, or 1.x600.
But, none of that changes the way the strategy is implemented. If 1.6100 presents a potential stop-hunting opportunity, then 1.6000 and 1.5500 should certainly be as good, or better. But, all three of those price levels would be traded the same way, under this strategy.
Stop-hunting at a particular round number does not imply breaching a support or resistance level. Let’s say the stop-hunters target 1.6100 (from above). If the stop-hunters have identified clusters of sell-stop orders at, or just below, 1.6100, then that price is viewed as a support level, at least by the traders who have placed their stops there.
If the stop-hunters gun those stops, driving the price briefly below 1.6100, that does not necessarily imply that the 1.6100 support level has been broken.
If the price continues down substantially from 1.6100, then the support level [B]is broken[/B]. But, if the stops are cleared out, and then the price rebounds back above 1.6100, then the 1.6100 support level [B]is still intact[/B]. In fact, it is now seen as a stronger support level than before, because it has withstood an attempt to break it.
In this latter case, where the stop-hunting raid was successful, but the support level held, there is no reason why the stop-hunters wouldn’t take another run at it, whenever favorable price action and a tempting cluster of stops offer them the opportunity. As far as I can see, there is no rule about waiting some period of time before attacking the same round number again.
Maybe some of the confusion on this point comes from the trade that Phil described, because in his trade support was broken in a spectacular fashion, and he went on to make big pips. But, a break of support (or resistance) is not a necessary part of this stop-hunting strategy.
In most cases, support and resistance should be viewed as price zones, not as specific fixed prices. So, when the stop-hunters penetrate 1.6100, and the triggered stops push the price to 1.6085 or 1.6080, and then the price rebounds and remains above 1.6100, we would have to say that the 1.6100 support level held.
The strategy in the article talks about using the 200SMA as a guide but if you’re going to target the in between 100 pip levels 1.61, 1.62, 1.63, etc. it seems better just to use the current trend in the price from the last few hours?
I personally think the strategy is better suited for the major psych levels at 1.6, 1.65, 1.7, etc. However, that’s not to say it doesn’t work at the in between levels.
Think we could use any other MAs in there say 50SMA, etc. as guides?
I mean, you could, for example, instead of targeting every 100 pips on an individual major, target all the major levels (1.x000) on many different pairs and would give you the same amount of trades and maybe better stop hunts? An indicator would easily give you notification of all these. There are a number of times I’ve seen price reapproach a 1.xx00 number only to fall short. Yet almost every time it nears a 1.x00 number it tries to test it.
I don’t have enough experience with the strategy to know which is better.
Before you start making all sorts of changes to the Schlossberg strategy, why don’t you trade it for a while just the way
Boris Schlossberg designed it?
He knows a thing or two about forex — he’s been doing this for more than 10 years.
You’ve been doing this for, what? Four months?
For anyone just joining this thread, the strategy we’re talking about is described in this article from Investopedia: Stop Hunting With The Big Players
