I was just curious if the practice of putting in stop losses is a bad practice. Or maybe not a bad practice, just that it can be troublesome for a trader to make successful trades when their broker is hunting their stops. I’m new to this and if it seems to be a rigged game (being that “90%” of traders lose all their money) I obviously need to adjust my trading plan accordingly. Thanks for any responses you have.
If you place your stops appropriately, they’ll be fine. Most of the folks who complain about stop running haven’t done so.
I’m engaging in serious broker research right now and I’ve consequently been reading many threads/articles so far that talk about stop hunting. One reoccurring statement is that retail brokers make their money by stop hunting. Maybe not individual stops, but groups of stops. The rationale is that for smaller brokers or brokers that allow smaller accounts, your money never actually leaves your broker most of the time, so targeting stops is a reasonable profit strategy. You agree to a generic price fluctuation statement in the terms of use agreement, so while the integrity of stop loss hunting is questionable, the legality may not be. Hopefully no one gets to mad at me, but this is what I’m coming up with as I read, and read, and read.
There is a prevailing opinion that stop loss hunting is part of the game. Brokers are there to make money just as the traders. Dog eat dog, watch you back. The more I read the more I feel like a fool to even think that one can make money through a retail broker.
What is appropriately? If I recall from Tymens candlestick thread, he places his stops quite tight in his examples; just a few pips above the morning star pattern. I’m thinking thats generally not appropriate when considering stop loss hunting. It would probably be safer to set stop losses that are 2x your take profit or more to avoid hunting, but then that doesn’t translate into good risk/reward. Is there a way to win? lol.
If you have a problem with it, use and ECN broker. That won’t necessarily eliminate stop running, though. It happens in exchange traded markets too. Ask anyone with experience in the futures pits, for example. My view of it all, though, is that if the market is sufficiently set-up to be easily run against your position then your trade probably doesn’t have a great chance of success anyway.
What is appropriately? If I recall from Tymens candlestick thread, he places his stops quite tight in his examples; just a few pips above the morning star pattern. I’m thinking thats generally not appropriate when considering stop loss hunting. It would probably be safer to set stop losses that are 2x your take profit or more to avoid hunting, but then that doesn’t translate into good risk/reward. Is there a way to win? lol.
Appropriately is entirely based on your strategy. Tymen is taking the view that “if the market goes to X it probably isn’t going to do what I thought” which is how I also approach stops.
I absolutely would not set my stop based on where I have my take profit. That’s looking at things backwards. And besides, the two generally have nothing to do with each other.
“There is a prevailing opinion that stop loss hunting is part of the game. Brokers are there to make money just as the traders. Dog eat dog, watch you back. The more I read the more I feel like a fool to even think that one can make money through a retail broker.”
Really, the majority of retail brokers just aren’t like that. Yes, they’re there to make money, but they don’t have to go through elaborate stop hunting to do so. Most traders lose without any help from anyone else 
Think about it:
- If they traded against you individually, you’d be able to tell straight away by other people from the same broker having been stopped out at different prices
- If a retail broker traded against all of their clients collectively, you’d see the discrepancy by comparing against different broker feeds
- If all retail brokers collectively traded against all their clients, everyone would move to ECNs. And again, it’d be obvious.
So why is it that forex is practically synonymous with stop hunting everywhere on the web except here? For accessibility and ease of use, I’d like to go with Oanda. But even on Oandas own forums they chew the company out for hunting! I’ve also been watching feeds from a few different brokers, and they are very different. Especially when it comes to candlestick wicks. Nothing totally blatant, but way more than 1 or 2 pips.
I hope that it’s not a real problem. I’ve gone from learning about chart patterns and indicators, to reviewing every broker that remotely fits my needs. I want to go back to learning how to trade.
Maybe everyone’s a little more realistic here, or collectively very lucky?! Every time I get stopped out, I compare the price with another broker, and I have never seen any discrepancy bigger than 2 pips.
What’s more, I’ve not seen one single proveable example from anyone where they’ve been the victim of stop hunting. Not a single one. Don’t get me wrong, I’m sure there are proper bucket shops out there, but Oanda’s not one of them. (My broker isn’t Oanda BTW)
Keep an eye on your trades and the broker, but don’t let it stop you trading.
Because people who lose money want to blame anything but themselves. Brokers are often #1 on the hit list. Besides, it’s human nature to complain loudly when one doesn’t get what is expected, but to remain rather quiet when one does.
Good idea.
I think to be hunted out by your broker individually you’d have to be making some pretty large-scale trades to catch their attention.
-Matt