Avoid Stop Hunting – Placing Effective Stop Loss

Avoid Stop Hunting – Placing Effective Stop Loss

In the past you may have been the victim of stop hunting algorithms.  In our Forex Trading Room and Forex Signal Service, we take various measures for our subscribers so they do not become easy victims of such algorithms.  One of our successful strategies is to help our members profit from buying into artificially depressed trading pair that may have been hit from from such algorithms.

In Forex Day Trading it is important to point our that two very important points must be brought to attention.  One, a large number of day traders enter stop loss in orders to protect their trades.  Two,  if not placed correctly, these  stop loss orders become sitting ducks for some professionals. In the past, market makers and Forex brokers may have run the stops, however recently  ‘stop hunting  algorithms’ have evolved to run the  stops of day traders.  These  algorithms in summary, speculate  where the stops are grouped and if stops are hit, algorithms are then programmed to sell short, then buy to cover.  Of course this is a basic summary, however the basis of this article is to make a brief point and not go into detail.

It is important to note that Forex brokers are some of the only entities that know  their own clients, aside of this, there is really no way to be sure where the stop orders may reside.   In all my years of day trading, on and off Wall Street, I would like to point out some important areas that one can find a plethora of stop orders.

1.)  Round numbers, certain pairs react better than others.
2.)  Just below trend lines.
3.) Just below crossover of certain moving averages.
4.) Below the swing lows made on forex pairs


avoid stop hunting- placing stop losses in forex


What is the Solution to Stop Hunting?

Some simple ways to not getting stopped out on your trades. Try to  placing stops in the zones where others cannot easily speculate on the obvious.
Anticipating news events and closing some or all prior to important events that are notorious for stop runs. Using smaller positions with wide stops and targets is another good method to utilize.

The foregoing are the tactics we use to generate profits in the contexts of my method.

With commodity pairs, (AUD/USD) we tend to see more in the way of trends.  Moving stops is a great method of protecting profits, a stop does not have to be as wide on this pair as it would on another pair like the EUR/JPY. Check out our twitter and facebook.



Gerard Mastra (BT)
Fx Live Day Trading – Chief Analyst

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