Stop Loss hunting and the whipsaw effect explained

FX:GBPUSD   British Pound / U.S. Dollar
1209 0
Regularly we see price break out after a consolidation, only to suddenly reverse and break out to the other side. Then, we continue swiftly in the direction of the initial breakout creating a "whipsaw" effect. Why is that ?

In simple words, it is the smart money that attracts retail traders by pushing in one direction (mainly breakout traders) and put their stop in the obvious location. Once there is enough volume , they will push the price to where they want to make their move.

I'm giving here an example on the chart with explanation of the actions, I hope it helps you understand these sudden moves. I'm not saying that GBPUSD will move this way, it is not a trade prediction, rather giving you an insight of how stop loss hunting usually takes place.

If you'd have any questions, let me know. If you like this explanation, give it a thumbs up !

Thanks and trade safe !

EN English
EN English (UK)
EN English (IN)
DE Deutsch
FR Français
ES Español
IT Italiano
PL Polski
SV Svenska
TR Türkçe
RU Русский
PT Português
ID Bahasa Indonesia
MS Bahasa Melayu
TH ภาษาไทย
VI Tiếng Việt
JA 日本語
KO 한국어
ZH 简体中文
ZH 繁體中文
AR العربية
HE עברית
Home Stock Screener Forex Screener Crypto Screener Economic Calendar How It Works Chart Features House Rules Moderators Website & Broker Solutions Widgets Stock Charting Library Feature Request Blog & News FAQ Help & Wiki Twitter
Profile Profile Settings Account and Billing My Support Tickets Contact Support Ideas Published Followers Following Private Messages Chat Sign Out