Stop Hunting

I am a novice who have heard about the term stop hunting. I have seen people here and elsewhere claiming brokers go after stops.

How is this possible since one broker alone on its own is too small to affect the massive forex market, unless there is collusion among the network of all the large banks, brokers, dealers and other financial institutions that make up what is called the spot foreign exchange market and whose interactions determine the price of currency.

Is this stop hunting thing a conspiracy theory or myth, or is it some thing that happens for sure. Where is the proof.

The brokers make money through the spread, so it would not matter if their clients make money or not. They do not lose any money if large orders made huge profits. So why go after stops. Are brokers really against somebody making enormous profits in massive trades.

If there is collusion, then price is not really determined by supply and demand and the forex market is not a free market.

I've seen a lot of posts lately about how online brokers are hunting everyone's
stops.

Look, for every stop of mine where I even slightly suspected I was being
victimized, there have been dozens if not hundreds where the market came
within a few pips of my stop, but didn't hit it. Why didn't my online broker
take those opportunities to take out my stops by fudging the rates by a
couple of pips?

When we see complaints about people's stops being "hunted", I think we are
typically reading examples of people using tight stops and being quite
flabbergasted that they actually lost some money. Or they were stunned to
have three or four stops taken out in a row.

This is trading, folks! If you can't take the heat, get out of the fire!

I am going to go out on a limb here and say that you are either too naive or don't know what you are talking about or both of the above.
Read the below, which was kindly posted by a user in another forum:

"stophunting is a very common "sport" in interbank community, especially when london bank traders come in in the morning or leave in the late afternoon. In the moring around 7-7.30 GMT their asian-branches pass all the orders and stops to the london traders and so they see where the stops of the customers are. Some of the larger banks/brokers are always in contact and so they know where all the larger stops are and usually they try to clear the stops on both directions in the early london morning. The same sometimes happens when the london traders leave and pass the orders to the yanks. the yanks sometimes go for their stops after 5-5.30 pm GMT. Thats the "classic" stop-hunting in the overlapping of the trading time-zones. Some other forms of stop-huntings also exists in the interbank community, where the larger banks report each other where some larger stops are and "try" to go there...sometimes its a very sucessful "sport" so far...

A lot of traders also speak about the stop-hunting of the brokers around the world, which is quiet a bit different. With the smaller and smaller spreads the brokers are offering nowadeays, their profit on a simple quoted trade with streaming prices got smaller in the past years. Their big income now comes from the stops they have in their books. So if they see that a lot of their customer stop-losses are at a certain point and the real market goes very close to this point, it is very easy for a broker to "quote" the currency in their favour, which means to quote serveral points away from the traded prices in the interbank market to "hunt" for the customer stops. As forex is a OTC-market there is no regualtion on this issue and sometimes its possible that brokers quote 5 pips and more away from the interbank prices. That means that they "earn" up to 5 pips by "hunting" your stop in getting a 5 pip better price from the counterparty they clear your trades after the stop is done (usually large banks and brokers). Compared with a 1 pip "income" for a broker on a single trade quiet a good business for all the "bucket-shop-brokers" around the world.

One of the "ugliest" form of "stop-hunting" is used in some cross-rates during "fast" markets, especially after some important numbers are announced. One example is EURJPY, which is the crossrate of EURUSD and USDJPY. Lets say the numbers ar USD-positive and USDJPY is rising fast and EURUSD is going down very fast at the same time, that normally means that the crossrate EURJPY is very "stable" and shouldn't move at all. But all brokers in this case look where the larger stops in their "crossrates" are sitting and then either quote one of the two major currencies usdjpy or eurusd first to get the "crossrate" moving to the customer stops....I have seen this many times where crossrates have been quoted 20-30 pips away where the real market traded and all the "bucket-shops" got some easy money again...

We can always walk the tightrope without a safety net -- no stops.

Just know what the heck you're doing, and don't fall and go -SPLAT-

Yeah, you sure sound like you know what the hell you're doing.

i look back at myself thinking they want to get my stop i laugh at myself sometimes....

Well IMHO, stop hunting is divided in 2 ways. There is the stop hunting which is a normal and legal part of trading. Where for example bulls (buyers) hunt stops on a huge scale. Let's say for example you shorted the cable and your stop is at 1.6620. Usually, the market reacts to round number levels such as 1.6600 so the market retraces to 1.6600, but you are surprised that you SL was hit and market reached only 1.6622 and went down again. That was caused by bulls pushing. This just an example not some exact science.
The second part is where retail brokers (market makers) hunting your stop, so the market reaches 1.6610 and they just spike the feed or widen the spread for a moment and that's it.
Of course all examples mentioned above apply for large orders. Of course it's a fact that when you're trading 7 or 8 lots, you're not even a part of the market, you're just road kill. So for retail clients, such as I, just benefit from this mediocre move and bag a couple of pips.

Right, stop hunting occurs as both ways you described.

but IMHO, its usually the first way you described where the big market players hunt your stops to get in at a better price. If you are foolish enough to use any unregulated broker to keep a live account with (its your fault if an unregulated bucket shop broker takes your money because isn't that why they're unregulated in the first place?) then no real trader will feel sympathy for you. And if they are regulated, but still screwed you, hell, sue them for a million and make some money apart from trading.

Correct

Glad we see eye to eye.

Hi guys and gals , interesting comments above ,I have traded for over 12years AND NEVER USED A STOP LOSS , I monitor my trades , stop hunting cant happen if you do this I have a large account and do positive swap trades 95% of the time again its rewarding collecting the swaps on top of profit , if you look at your charts you can see the ups and downs swings , small accounts I can see the logic behind a stop loss however again small accounts are allways in danger

stop hunting is just a losers reason for making a bad move.and not analaysing the market well.