- Stop hunting: a false pretext?
- Only the truth about forex
- 1. Brokers are Not the Only Suspects
- How Knowing About The Stop Hunting Forex Can Make You A Better Trader.
Soon after he made an entry, the price dropped and touched his stop loss level. When he was about to consider the incident as a normal loss, the price moved back up and formed a false break around the 1. Bob was left dumbfounded and feeling betrayed as he would still have a chance to make a profit if he placed the stop loss at a lower level. Similar to the Exhibit A, the "false break" incident happened too many times. Exhibit A is a perfect example of a victim targeted by a broker. Normally, such a broker is a market maker who does not deliver their clients' orders to the market.
On the other hand, Exhibit B is considered as a trader's mistake in placing the stop loss. How do big players exactly get their benefits? The basic principles can be traced from the buyer and seller correlation in the forex market. When you want to buy a currency pair, there will be the other side who sells the asset to you. So, it's clear that if an unknowing trader would want to open a buy position, the big players would get ready on the other side. They would prey on the victim's simple knowledge about the support resistance and bait them to trade around the key area.
For instance, to stimulate an amateur trader opening a sell position at the support level, they move the price on purpose a little bit under the support level. Then, they open a buy position with a bigger volume to push the price back. The big players usually have transactions as an institutional trader that owns enough ammunition to manipulate the price movement.
They have special skills so they can predict the stop loss levels of their target. They are mostly determined by these 5 factors:. If the stop loss hunters target stop loss levels that can automatically close a transaction with a loss, should we try to place the stop loss manually?
The answer will depend on your skill as a trader. If you are a pro and you can close the position manually without letting your emotion interfere with your decision, then do it. However, if you are often influenced by emotions, the manual way will only speed up your loss.
As a solution, you can anticipate the stop loss hunters by setting the stop loss several pips away from the key level. Take an example of John and Bob's positions above. Choosing a psychological level at 1. To anticipate this, they should take some space around the stop loss.
It can be at 1. Besides, it is better to choose the stop loss based on the risk management rules. If your risk tolerance is 30 pips loss for every position, then make it as your general thumb of rule and never break it. Such rule is impossible to be predicted by stop loss hunters because every trader has their own risk management setups.
Stop hunting: a false pretext?
Unless the level coincides with the psychological level or the other 4 levels used by the stop loss hunters, you should be safer using your own risk management rule to set up the stop loss. Concluding from the previous examples above, false breaks generally indicate stop loss hunters in action. This condition is usually marked by the price that moves as if it breaks an important level and causes a breakout. Due to the high possibility of a breakout, many traders are distracted by such a false break. Meanwhile, if they learn how to identify and confirm a breakout, the loss caused by the false break can be minimized.
Only the truth about forex
So, one of the suggested methods to overcome this problem is to wait for the price action confirmation. If the market is full of uncertainties and creates a high-risk environment in which false breaks are most likely to occur, the price usually forms a lot of long-wick candlesticks. If the candlestick breaks an important level, do not directly assume that it is a breakout signal. You should wait for a while until the next candle closes outside the support or resistance level to get further confirmation.
Also, make sure the candle has created a bullish or bearish form. A break from the support will be confirmed if it is continued with a bearish candle, whereas a break from the resistance level is only validated if it is followed by bullish candles. As a trader, you should be aware of the looming threat of stop loss hunters.
They usually have the skills and experience to take advantage of the amateur traders' mistakes in placing the stop loss. If you are in a rush, the big players will use their knowledge and years of experience to play their victims. They know that newbies are prone to emotional decisions and will take an advantage of that.
So, prepare your mind as best as possible. In this case, learning how to manage your trading psychology may be a good beginning. Sometimes, falling into the trap of stop loss hunters is due to your own mistake. What can you do to protect your money from them? Brokers are Not the Only Suspects Perhaps at some point, you feel cheated by your broker.
1. Brokers are Not the Only Suspects
See also: Recognizing Forex Broker Scams While the notion is not entirely wrong depends on what kind of broker we are talking about , it is also not absolutely true. Feeling confused? They are mostly determined by these 5 factors: The psychology level.
IMHO, its a fiction. The scenario that you had mentioned is when the price go to the price level that all the commercial and big player position their execution.
How Knowing About The Stop Hunting Forex Can Make You A Better Trader.
The price will always go to these levels as these level provide a lot of orders. We as a retail trader definitely will never know where is the price level unless you join us or you are harworking enough and google it for yourself. To resolve this matter in the easiest way is to install pivot point in your MT4 templete suggestion. PM me to get it. I think you are completely wrong, but I have a question.
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First, if you look at different feeds, you will always see wick differences that are caused by Market Makers hunting their customers stops. If price movement is independent, then how is it that Currency Futures moves nearly mirror the Spot market. Are the same buyers and sellers doing the same thing in both markets across all currencies. This would be impossible, unless a computer program were moving them - bank algos.
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