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A lot of Forex traders accuse their brokers of hunting their stop losses. And don’t get me wrong, you should investigate your broker before giving them your money. The biggest complaint that confuses me is the claim brokers hunt stops.
Traders think if they place a stop loss with their broker, the broker will use this information to move price and take them out of the trade. The reason many traders think this is because it happens so often. You place a trade and your stop loss… then you watch price come right up to take your stop out before moving in the original direction.
Yes, this is very frustrating. But I think your anger is directed toward the brokers instead of the traders really responsible. I don’t think it is the broker hunting your stops… but the professional Forex traders. (After all, most of us are not trading accounts that matter in the big picture… so it is a little egotistical to think the broker cares about our puny trade). Here is a more logical explanation of what is going on.
Here is an example of why stop running happens. You, the novice at home trader have identified a good level to SHORT a currency pair. You place your SHORT trade and put your stop loss in a logical place… the last swing high. At first you see profits… until Price reverses direction and takes out your stop!
Well, the big traders also identified this area to go SHORT, but they don’t want to get in late. Therefore, they push price UP, knowing most people in the trade have their stop losses above the last swing high. Then they reverse their trade and go SHORT.
Here is what this accomplishes. They get into the SHORT trade at a much better price with much more profit potential. They know the market wants to go short, and all those traders that had their stop loss taken out are going to jump back into the market… creating momentum. This is how the professional traders can get into the move at the beginning and make profits faster.
I hope you can see that stop running is not really about just you and your broker. Professional traders use this technique to make more money. I think it is shortsighted to focus on the brokers and more accurate to focus on the professional Forex traders.
This is just one example of how learning price action Forex trading can give you insight into what the big Forex traders are doing. They are, after all, the ones moving the markets. Price on your chart gives you insight into what they are doing and which way they want to trade… which you can use to trade WITH the pros, and not against them.
So, stop looking at your broker as the cause of your stops being taken out. That is unproductive. Learn to identify what the big traders are doing and turn stop hunting by the pros to your advantage. The next time you see a perfect trade setup that reverses to take out the previous swing high or swing low… don’t get mad, get into the trade when the pros do!
To profit from pro traders hunting your stops go here: Price Running Setup. To learn more about price action Forex trading and the best systems, check this out:Price Action Forex
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