Stop-Loss levels wiped out deliberately? | Forex Factory

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Stop-Loss levels wiped out deliberately?

  • #1
  • First Post: Oct 30, 2006 2:32am Oct 30, 2006 2:32am
Hi guys.
I'm sorry if this should be in the newbies section, but I rather thought that the contributors on this one would have more idea re the deliberate taking out of stop-loss levels.

It's just something I came across a couple of days ago, and I hadn't heard of it before. I believe that it's advisable to set one's stop-loss level a couple of pips or so up or down from certain levels because of a deliberate ploy of setting the price so that it wipes out most of the traders who have set their SL at that particular level. Does that make sense? Have I got it right?

Probably a pretty basic question for this forum, for which I apologize, but I thought I'd better ask the experts, so that I'm a bit more clued up next I make a trade.

Thanks for your time, lads and lasses.
  • #2
  • Oct 30, 2006 2:42am Oct 30, 2006 2:42am
It depends on your strategy. For example, I set my stops according to support and resistance (S&R), so I set the stop ten pips above or below, in order to give the pair a little breathing room.

You should also avoid setting stops at psychological areas like double zero's and other rounded areas...
Mr. Trend
  • #3
  • Oct 30, 2006 2:51am Oct 30, 2006 2:51am
Quoting eyevoltage
Hi guys.
I'm sorry if this should be in the newbies section, but I rather thought that the contributors on this one would have more idea re the deliberate taking out of stop-loss levels.

It's just something I came across a couple of days ago, and I hadn't heard of it before. I believe that it's advisable to set one's stop-loss level a couple of pips or so up or down from certain levels because of a deliberate ploy of setting the price so that it wipes out most of the traders who have set their SL at that particular level. Does that make sense? Have I got it right?

Probably a pretty basic question for this forum, for which I apologize, but I thought I'd better ask the experts, so that I'm a bit more clued up next I make a trade.

Thanks for your time, lads and lasses.
Deliberate or not is hard to say. It could also come down to a supply/demand issue. People have an inherent tendency to trade at only certain technical levels on the chart, namely being the 00,50 psychological marks, and the fib levels of around 38 and 62 and other minor levels. Consequently, if the majority of the orders on the market exist around these levels and there are not a large number of people selling/buying in between these levels, then when a large institution comes along with a huge order, it takes up all the orders in between the price levels and begins to work on the huge number of orders at all those levels. If the bank's order is big enough, it will blow through the stops on a certain level and keep on going. If enough supply exists at a certain level to offset the bank order, then that level will hold.

If your idea is to prevent being stopped out only a few pips away from certain levels, there is merit to the concept, but note that there are sometimes spikes that run through these levels for only a brief few seconds that can still grab you out of the market anyway.

Hope that all helps some.

GirlFlyer
  • #4
  • Oct 30, 2006 3:00am Oct 30, 2006 3:00am
Quoting eyevoltage
Hi guys.
I'm sorry if this should be in the newbies section, but I rather thought that the contributors on this one would have more idea re the deliberate taking out of stop-loss levels.

It's just something I came across a couple of days ago, and I hadn't heard of it before. I believe that it's advisable to set one's stop-loss level a couple of pips or so up or down from certain levels because of a deliberate ploy of setting the price so that it wipes out most of the traders who have set their SL at that particular level. Does that make sense? Have I got it right?

Probably a pretty basic question for this forum, for which I apologize, but I thought I'd better ask the experts, so that I'm a bit more clued up next I make a trade.

Thanks for your time, lads and lasses.
Hi

Stoploss hunting is a reality. Just browse this forum and you will find enough info and perhaps advice on how to deal with this issue.
Never Ever Give Up!
  • #5
  • Oct 30, 2006 3:01am Oct 30, 2006 3:01am
Quoting GirlFlyer
If your idea is to prevent being stopped out only a few pips away from certain levels, there is merit to the concept, but note that there are sometimes spikes that run through these levels for only a brief few seconds that can still grab you out of the market anyway.

Hope that all helps some.

GirlFlyer
GirlFlyer's post was excellent, but if I may just add to this particular comment -- this is where you have to make sure that you backtest and forward test appropriately. Getting these values right is the most important aspect of tweaking a system.

Anyone can enter the market -- figuring out the sweet spot of getting out is the trick...

You really can only be sure of yourself when you've back/forward tested these variables.
Mr. Trend
  • #6
  • Oct 30, 2006 4:24am Oct 30, 2006 4:24am
Yes it does happen, in fact I watched a video from a trading expo some time ago where one of the panel members worked on the dealing desk of a major broker, i.e. the guy who is taking the other side of your trade. He admitted straight out that the practice does happen, someone else might remember where I saw that.
You can quit and they won't care, but you will always know.
  • #7
  • Oct 30, 2006 5:17am Oct 30, 2006 5:17am
Interesting article here.
  • #8
  • Oct 31, 2006 5:40pm Oct 31, 2006 5:40pm
Hi again.

Just wanted to say thanks very much for the info you shared regarding the stop-hunting dirty tricks brigade!

Really invaluable, guys, and I truly appreciate it. I'll be keeping a clued-up weather eye on where I place my stops in future!

The article in Investopedia was a real eye-opener, so special thanks to wallym for that one.

Thanks again, folks.
  • #9
  • Last Post: Oct 31, 2006 10:40pm Oct 31, 2006 10:40pm
God no! All brokers are honest and are absolutely not trying to screw you and me! The hell you say! They want us to make money!
"The time to act is when others show signs of tire." --W.D. Gann
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