Oztrade

STOP HUNTING STRATEGY FOREX - WHY ITS NOT SAFE

FX:EURUSD   Euro Fx/U.S. Dollar
892 0 8
Hi All, I wanted to share this with you to help explain Stop Hunting Strategy.

Many of you may still wonder if it is actually true and speculate and some may even get confused on this strategy. The Big Forex Players have a lot of money invested in their orders to gain as much as they can, they will use the even numbers and have a zone where they know that there will be millions of stops placed at those levels.

Stop hunting is not illegal its just a strategy that makes profit for those who trade it which would be the Hedge Funds, Centre Banks, Institutional Investors and so on.

They will try to drive the market further to gain extra momentum from traders which will push their targets or profits further upwards in this case. The market players are no different than that of a poker player trying to get lower traders out of the game and having more buyers come on board.

They generally have an amount allocated to push the market further to cause the pair to become more liquid and drive it further by stopping you out and getting more poker players to buy the pot, many novice traders will set stops 10 or 11 pips above X or above entry. Most of these big players will try to push the market to 15 above.

If they dont hit these stops which are the sellers then the momentum will fail and the price will drop as more sellers come on board and they will exit their positions because their strategy has failed. They still win but they lose some from trying this extra push in momentum .

If they succeed by stopping out all of the sellers, the buyers come on board hence the market continues upwards.

In this example it is even numbers which they know are psychological to traders and we see many bulls and bears at these area's especially if it is a completion of a technical trade.

So we look at this chart - 1.15000 - so the trade zone will be 1.14850 to 1.15150 - 15 above 15 below

It is important that traders have their stops in unusual positions they will not generally push the market to 1.15265 it will be in that zone which we like to say the TRADE ZONE which is 15 above 15 below which is an area of 30 in total.

It would be in my view that in time as many people implement changes in market conditions that over time one strategy that was producing profits will no doubt over time start to lose and they will generally make changes to increase the strategy. In time we may see these traders push the market further in anticipation to get the traders with stops at a higher level.

If you are trading and get stopped out their is nothing you can do based on the momentum then thats fine, it just means the buyer or sellers were stronger. And we look for our next reason for entry This is just a good trade lost

Know your stop levels to be safe, watch the price action with the high's and closes. If price at a high structure point pushes up fast then drops dramatically this indicates they were trying to get these stops and failed and the Bears have won the battle

They try to push it past that stop level and change traders from Bears to Bulls or Vice Versa

If there are 10 million traders all looking at this level for entry to sell off then most times it will be hard for them to push the market or compete with the Bears - again you can look at it like poker players as much as we dont gamble and trade our technical analysis - it we Sell $20 million in the POT and they Buy $10 million then the pot is stronger in the sell. If they cant stop out the $11 million then the sell is still stronger.

This is why I use 1.113% above X for my advanced patterns - this generally keeps it at a safe stop level, for larger patterns my stops may be at 96pips above entry - or 40 to 50 above X
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