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-   -   Stop Hunting using Sentiment and Market Structure (https://www.forexfactory.com/showthread.php?t=943641)

SentiFX Aug 26, 2019 11:55am | Post# 1

If you've traded the markets for any amount of time, you will likely feel like someone is out there hunting your stops. You may feel like your trades are constantly being targeted.

But are your stops really being hunted? By who? Why does this seem to keep happening only for the market to go in the direction you originally intended?

You hear that 90-95% of retail traders fail, but have you asked why? Is there something about the way that retail traders think that is causing consistent losses over time? I believe so.

Is it possible to think differently and trade the opposite to become profitable instead? If you are willing to challenge your beliefs and explore alternatives, yes.

Have you ever wondered why support or resistance didn't act like you would expect? What if I told you the traditional concept of support and resistance is a lie and that behavioral psychology is a much more useful belief in understanding order flow.

In this thread we will explore over time how stops are hunted for both entry and exit so that you can get in at wholesale and get out at retail.

We will explore how sentiment can be a strong driver of price absent a news catalyst... and how Market Structure really works and why.

If you're already consistently profitable, keep doing what you're doing.

For everyone else, the journey of thinking differently is about to begin.

SentiFX Aug 27, 2019 6:34pm | Post# 2

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Current Retail Positioning, Retail is currently piling in long EURUSD
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SentiFX Aug 27, 2019 6:35pm | Post# 3

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Current EURUSD price chart.

Where are the stops?
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Js3mwtRc Aug 28, 2019 4:52am | Post# 4

Current EURUSD price chart. Where are the stops? {image}
Sellers stops should be around 1.1125-30 and for buyers all along below here, 1.1070 and down until 1.1050, the market is bearish. Nice graphic how do you choose the pairs?

SentiFX Aug 28, 2019 10:57am | Post# 5

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{quote} Sellers stops should be around 1.1125-30 and for buyers all along below here, 1.1070 and down until 1.1050, the market is bearish. Nice graphic how do you choose the pairs?
Correct, here is the current situation with likely stops for both longs and shorts marked.

The thing to consider is, if retail is becoming heavily LONG and you are a MM (Market Maker), and you wanted to take their stops, where would you push price to?
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SentiFX Aug 28, 2019 11:01am | Post# 6

Keep in mind, trading is always about probabilities, never certainty. We are in the risk and probability business.

What is LIKELY to happen??

Absent NEWS that could drive price in either direction, what is more likely to play out here? Retail is Long EURUSD.

For every buyer you need a seller, and ever seller you need a buyer.

If retail is BUYING EURUSD, they have to SELL at their stop loss. If you are SELLING EURUSD, you can BUY their stops to close out.

Shabs19 Aug 28, 2019 11:58am | Post# 7

I always think in terms of what would a broker need to do to price, to get retail to BUY / SELL their current position ?

Anusragger Aug 28, 2019 12:00pm | Post# 8

If retail is only 5% of the entire FX market, how could they ever move the market? Why would brokers try to hit their stops? It's 275 billion dollar plus market daily, so even if they would want to do that. Do you really think they could?

Shabs19 Aug 28, 2019 12:15pm | Post# 9

Smaller banks & institutions can also be retail. The large Banks (LP's) can & do move the markets.

On the above chart, price broke above last weeks high by 10 pips to entice further Longs into the market, you know the rest.

TradeMinim Aug 28, 2019 12:22pm | Post# 10

One of the reasons is because most traders don't know what market phases they are trading in,
and entering the trades with tight stops. It's a non stop tug of war between institutions, banks and retailers.

But here comes the point, What can you do about it? How can you profit from this edge?
How can I find a method to validate this hypothesis? Solve these puzzles and you will head
towards profitability. Don't chase the unicorn. Trade safe

Js3mwtRc Aug 28, 2019 12:28pm | Post# 11

It is not nice to see all of your stops eaten by bigger traders with more money, but that's just retail forex trading and it can't change, at least I can't think nothing that can help except the right risk management.

Another one problem that is bothering me for days is why and how a market will turn, let's take AUD & NZD/JPY for example the trend is always tricky for the retail trader, it moves up and then it takes down another low. Why be a buyer here, but this is why I am trading and I am a risk trader, also I don't use sentiment like a contrarian indicator, but as a tool to help me with my confidence and I like buying scary bottoms, or sell tops too, who doesn't, but I use caution.

Anusragger Aug 28, 2019 12:54pm | Post# 12

Does the FX market determine the price of a currency? Or is the price of a pair determined by the value of an individual currency?

Anusragger Aug 28, 2019 1:02pm | Post# 13

FX is not centralized. How come brokers quote the same prices (more or less). Doesnt this decentralization make it harder or even impossible to "move the market"?

Shabs19 Aug 28, 2019 1:10pm | Post# 14

Does the FX market determine the price of a currency? Or is the price of a pair determined by the value of an individual currency?
The Fx market will decide the price of a currency, value is what the market perceives it to be.
Your definition of Value is based on the economics of the two countries, but not always in sync with the fx market.

It is not nice to see all of your stops eaten by bigger traders with more money,
Stops are just liquidity pools where orders can get filled. No LP nearby then price will move to the next available to get a fill.
Markets are there to do business, win or lose.

Anusragger Aug 28, 2019 1:16pm | Post# 15

{quote} The Fx market will decide the price of a currency, value is what the market perceives it to be. Your definition of Value is based on the economics of the two countries, but not always in sync with the fx market.
So price of individual currency indexes is also derived from FX prices?

Shabs19 Aug 28, 2019 1:22pm | Post# 16

{quote} So price of individual currency indexes is also derived from FX prices?
https://www.thebalance.com/u-s-dolla...l-data-3306249

Shabs19 Aug 28, 2019 1:40pm | Post# 17

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FX is not centralized. How come brokers quote the same prices (more or less). Doesnt this decentralization make it harder or even impossible to "move the market"?
The market is well connected, sometimes there can be slight differences called arbitrage, but retail would not be able to profit due to spread widening by brokers.
This diagram might help:

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SentiFX Aug 28, 2019 4:45pm | Post# 18

Stops are just liquidity pools where orders can get filled. No LP nearby then price will move to the next available to get a fill. Markets are there to do business, win or lose.
That is correct, yes retail cannot move the currency market - but retail is a great liquidity provider.

Shabs19 Aug 28, 2019 5:53pm | Post# 19

{quote} That is correct, yes retail cannot move the currency market - but retail is a great liquidity provider.
Please carry on, don't want take over your thread.

SentiFX Aug 29, 2019 10:38am | Post# 20

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Good Morning Traders,

Stops are in sight, if you took the trade it's good practice to take some off the table at the base of structure or move stops to break even.

Either way you should have bagged a few pips.
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