Is there stop loss hunting in trading ? How to deal with it ?

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
Hello everyone:

Today I want to discuss a common discussion about new and experienced traders.

“Is there stop loss hunting in trading?”

Many wonder, since they can all recall the moment where price just hits their SL on a trade, and then the market quickly turns around towards their desired profit direction.

I want to dig deeper into this and explain it with different viewpoints, from a technical and psychological view.

The vision I am trying to provide is that, thinking about is there stop loss from the brokers won't help you to get better in trading.
It's a mindset thing we need to understand. For example, whether there is or isn't a stop loss hunting, it's nothing you or I can change or control. It is what it is.
However, if you understand this, then it's about adjusting your plan, strategies and trading style to these types of volatility moves and come up with the correct mindset to work around it.

Technical part:
More often, people set their SL and see their trades get taken out just a few pips above before reversing the opposite way.
Dig deeper into this. Is it a fake breakout, is it just being impatient and jumping the gun?
Is there LTF continuation/reversal correction that gives you bias to enter a long/short ?
Is your analysis aligned with the higher time frames ?
Many factors on why a trade is at a loss, no need to jump right into a conclusion that it's the broker who is stop hunting you.

This is why we always look for confirmation and confluence when we enter trades.
Just because the price breaks the support and resistance line people often use, it's not an automatic buy or sell.
Same goes with trend lines and other indicators people use.
We need to confirm it with price action. After an impulse phrase, was there a continuation correction phrase? If not, then it doesn't justify a buy entry.
This is also why we backtest so we see these types of price action often, and acknowledge what we need to do in order to work our ways around it.

Psychological part:
When traders take a loss in this way, hitting the SL and reverse, this creates a negative emotion in them.
They often get frustrated and upset, hence in human nature, we tend to blame others.
But take a step back and understand this:

The market can do whatever it wants to do.

Most beginner and newcomer traders think the market MUST follow their strategies and style. If it doesn't, then something is wrong with the market, the brokers, their mentor/coach, their strategies...etc.
This negative mindset needs to change.

First of all no strategies and style will promise you 100% strike rate and profit.
Any strategies you take will incur a loss, it's how you deal and manage it that will show you as a consistent or inconsistent trader.

Second, if you have experienced several losses due to the “Stop hunt” in your own mind, then instead of blaming the brokers or the markets, start looking into your trading plan and management.
Are you experiencing FOMO ? Are you over leverage trading, and revenge trading ? Are you taking into consideration your risk management ? Entry, SL/TP, how much to risk ? Is it consistent with your plan ?
These are the things you can control, rather than external factors which you can not. Adjust yourself.

Third, remove your negative emotion from your losses. Take it as a learning curve and experiences earned.
Then the next time you enter a trade, you will remember the lessons that were taught to you by the market.
This is why we journal our trades so we can look back at them and understand what we did.

I hope these few pointers will help some of you to get back on the positive direction of trading.
No need to think and get upset if there is a stop hunting of your trades. Instead, use that towards your advantages.
If you consistently see a false breakout and reverse, then come up with a strategy and plan to capture that reversal move.
No need to blame the market or the broker, that is something you can not control. Jumping brokers to brothers simply won't help you to eliminate that psychological mindset of a stop hunting.

I will put below several other educational videos on the topic we discussed today.

As always, any questions, comments or feedback welcome to let me know :)

Trading Plan:

Risk Management:

Trading Psychology:

Revenge Trading:

Over Leverage:

Price action analysis, live market update, Group Q/A, educational videos/lessons.


Great, GREAT JOB!!!
Really apreciete your work!
+2 Reply
jojofang0901 OptimoomFX
@OptimoomFX, thank you :) appreciate it as always.
Thanks for this video! We've featured it in Editors' Picks. We look forward to reading the comments below.
+1 Reply
jojofang0901 TradingView
@TradingView great thank you 🙏
Some of this is undoubtedly true but there is no doubt whatsoever that the big money cleans up retail stops. Try trading front-month series options and you will see the manipulation in every approach to expiry. 9 times out of 10, the price of the underlying instrument is moved to the minimum payout point for the issuers. The issuers don't sell options contracts without holding enough of the daily trading volume to do this. We can extend this out to stocks, cryptos, whatever you like. The huge disadvantage that small traders are up against is that they don't see the full spectrum of buy and sell orders sitting in the system. If you do have access to this information, it is easy to see where small buyers are putting their money at risk and where they are running out of money or running into fear. So, how do we deal with this? Here, I agree with the post. If you are prepared to be reasonable in your expectations, you can get in and out with a profit using good risk management. Pigs get slaughtered. However, the repeated comment that "the broker is not to blame" is often wrong in my opinion. Way back when I was a green options' trader believing that I could hit home runs trading out-of-the-money options close to expiry, I found this out the hard way. This was back when the minimum commission was $15. The only buyer that could possibly benefit from buying a single options contract at $0.05/option ($5/contract) off me on expiry day with no chance of the underlying instrument exceeding the strike was my own broker. Period. Your broker is trading against you!
+3 Reply
jojofang0901 Xcalibur007
@Xcalibur007 great inputs thank you.
Awesome, thanks
+1 Reply
jojofang0901 KlejdiCuni
@KlejdiCuni thx yu
Thank you very much and keep up the great work 👍🏻
+1 Reply
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