Stops & Stop hunting in Forex Market means?

Stops are orders set to close your positions if the trade goes against you by the amount of pips you stipulate. I want to take a minute to talk about stops as this is something I see many traders struggling with all the time. You may have heard of stop hunting, it is not a myth, it actually happens although usually not to the extremes many traders talk about.

Many of the retail brokers that require only a small deposit to open an account are often not giving you direct access to the forex market as the positions you are trading are too small. Instead they take the other side of the position themselves because it is a fact that the majority of traders lose money overall and the brokers are playing this to their advantage. So you make your small mini lot trade and the broker takes the other side at their dealing desk, you place your stop which the broker can see on their platform and you go about your business.

Now it is important that I point out the broker is not targeting your position, there will be thousands of positions with stops in the same place and as price comes within 5 pips or so the broker may manipulate the data feed by 5 pips to take out all these stops. So how do we avoid being at the mercy of the broker? We trade longer term charts and avoid all the stressful day trading systems out there that require small stops. Different traders use stops in different ways, some use stops as protection against a sudden market crash and some don’t use them at all due to suspicion that brokers try to take them out. A trade should have a stop placed at a point that gives the trade room to breath and if the trade did go beyond that point, there would be no question that the trade was no longer valid. This is the approach I take with my trading and it has served me well, I have a max pip stop I am willing to risk and I do not allow myself to move this stop once it is placed.

Many traders fail to realise that trades will not immediately go in your direction all the time, they need breathing space. As soon as I began giving my trades more breathing space I saw my win percentage go through the roof. It’s the whipsaws that get many traders out of the market just before price heads off in the anticipated direction, especially if you are trying to trade the small intraday time frames. The systems presented in this course are designed to give price plenty of breathing space while still allowing us to get a good risk reward ratio on our trading positions. This eliminates the broker trying to take us out and also gives our trades room to move.

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