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Stop Loss Hunting, Manipulation by the Smart Money in Forex

  • Post #1
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  • First Post: Jan 28, 2023 6:15pm Jan 28, 2023 6:15pm
Stop Loss Hunting, Manipulation by the Smart Money in Forex

Some Forex traders may be unaware of how stop loss hunting and market manipulation is done by the smart money.
Who is smart money ?
What is smart money ?
Where can we find their position in market ?.

Is there any study the inner workings of Forex trading, and how stop loss orders are hunted by the smart money.
How to get onto study the inner workings in Forex on how stop loss orders are hunted by the smart money.

As a Newbie, I would appreciate for someone to shares how Stop Loss, Manipulations and Smart Money game play in Forex market.
Much enthusiasm and much wisdom of the opportunities and dangers of trading Forex and why we need an edge.

Opening up discussion to experience and professional traders in FF to help me to understand the FX MARKET MANIPULATION conducted by “Smart Money Algorithms”.

Hope I can learn from you all.
I come from the future.
  • Post #2
  • Quote
  • Edited 6:35pm Jan 28, 2023 6:23pm | Edited 6:35pm
Quote
Opening up discussion to experience and professional traders in FF to help me to understand the FX MARKET MANIPULATION conducted by “Smart Money Algorithms”.

Good thread
. .
my opinion in summary, hide your stop loss . .
there is a StopLoss but into your mind . . .

my style is based on my theory MCP ... MarginCallPips
MCP=250 for example ===> Margin call will visit me after 250 pips
therefore if always my stop after 50 pips (20% loss -- i use hedge as an indirect StopLoss) ... i have a chance of 200 pips . .

but here i do not mean 50 pips for specific pair, i mean diversified pairs (may be 10 pairs)
their common stopLoss is 50 pips (some of them may be in the profitable area)
. .
to summarize, if they have their leeway methods, also we have our own sinuous leeways a against them . .
. . only MCP succeeded with me! to overcome them! (MCP says: do not care for them)
Be yourself
Reason for high rate of failure in Forex.


There are the harsh statistics, more like 95 percent of Traders lose money in Forex …. this is a bit of a fact check.

The reason for that is that first of all as a price taker in this market without specific knowledge on the Forex Market structure thus chances of success are very very low because you need to understand how the so-called smart money algorithms actually operate and what kind of principles they apply to the market every single day.

These kind of topics they are inherent to the market itself all the broker manipulation comes on top of that we see.

Looking at the actual price action why does currency pairs move like it does and go up and down. ?
Why does the price action look so erratic to outsiders? who do not understand the market.
I come from the future.
Quoting Macd-rsi
{quote} Good thread . . my opinion in summary, hide your stop loss . . there is a StopLoss but into your mind . . . ays: do not care for them)
You’re saying…would it make sense for the for the dumb money to not use regular stop-loss orders and just use Mental stop losses or just d’ont use any SL at all because by using a regular stop loss they make their intentions known and puts a big bullseye on their forehead for the smart money to run their stops.

Unfortunately, as a prudent trader , the answer to your suggestion is NO, because if you do not use a stopping a trading your downside is unlimited so one single move could blow your account.

Having to use stops one way or another to protect your downside but what you said excellently because many people come to that conclusion and guess what that's a trap in itself because if you don't use a stop... yeah eventually when there will be some move
which is so unusual.
Remember for example the Euro Swissy so-called Black Swan flash crash thousands of Pips in movements.

Why a trader want to put your whole account at risk ?
So the solution to that is not do stops however I have to say in all fairness is to understand how Best trader ever to have lived 4.0 hedge his position.
I come from the future.
  • Post #5
  • Quote
  • Edited 7:00pm Jan 28, 2023 6:49pm | Edited 7:00pm
i compelete my prev post
Quoting Pat Chiko
{quote} Remember for example the Euro Swissy so-called Black Swan flash crash thousands of Pips in movements. .
at that time, assume i have a position at 1.2000
and my stoploss is 1.1950
it hit my stop at 1.0800
!!
at cracks, with a good broker, you set SL or not!! the same thing

but now my style deals with any crack, reason: currency diversification . . .

plus: at that time-for example--every body knew in advance, that at 10:00 o'clock morning there was an CHF-event .. at that time some brokers changed leverages week ahead! some signs for us to be more cautious.

till this day, i deal with that CHF event seriously ..

my MCP is 250 at min ?? what is your MCP?? (your psychological number)
for any new trader it must be 2000 pips or higher . .




and if he trades crypto BTCUSD .. it should be at least 25000 pips (for new traders) .... 10000 for professionals
Be yourself
Where do this so called Smart Money hang out ?

Just curious where does the smart money hang out.
I've heard of this thing called Dark Pools do many of their transactions and their positions
Attached Image (click to enlarge)
Click to Enlarge Name: dark pool.jpg Size: 114 KB


Anyone of you have an access to the dark pools, please Private Message...
We can see their positions in there and join in their quest.

I understnad that the smart money Players as some kind of cartel they will not trade against each
other it wouldn't make any sense similar to the prisoner's dilemma you know in economics they
will not end up trading against each other their algorithms are aligned they don't need manual
intervention.

This is all automated and is done by programmers there they use certain things such as dog pools
and other things to align the overall uh Market with AI.
I come from the future.
Quoting Macd-rsi
i compelete my prev post {quote} at that time, assume i have a position at 1.2000 and my stoploss is 1.1950 it hit my stop at 1.0800 !! at cracks, with a good broker, you set SL or not!! the same thing but now my style deals with any crack, reason: currency diversification . . . plus: at that time-for example--every body knew in advance, that at 10:00 o'clock morning there was an CHF-event .. at that time some brokers changed leverages week ahead! some signs for us to be more cautious. till this day, i deal with that CHF event seriously...
OK, thank for update.
And appreciate your help here for newbie to learn and protect my tiny account.

Sincerely
PAT
I come from the future.
  • Post #8
  • Quote
  • Edited 10:06pm Jan 28, 2023 7:13pm | Edited 10:06pm
Quoting Pat Chiko
What is smart money ? Where can we find their position in market ?
Before "smart money" was a buzzword the terms were "strong hands" and "weak hands," going back over a hundred years.

Strong hands buy below prior swing lows where the weak hands place their stop losses on their long positions. Then the weak hands get short at the break of those lows. The strong hands accumulate long positions and hold it, and so demand causes prices to rise above the prior swing highs, where the weak hands have their stop losses on their short positions, and then reverse to long positions at those high prices. Meanwhile, the strong hands have liquidated their long positions by selling to the short covering retail traders and the newly long retail traders.

Then the process repeats.

My trading, both my day trading and my swing trading became consistently profitable when I started buying low at previous lows (low of the day, low of the previous day, low of last week, low of last month) and selling or getting short at previous highs.

"Smart money," i.e., strong traders take long positions at or below previous market lows. Strong traders sell longs and take short positions at or above previous market highs.

You can transform your trading from trapped retail to so-called "smart money" simply by trading only at market extremes.

Look at gold yesterday (Friday 1-27-2023). "They," i.e., the "smart money" ran price at the NY open back into the Globex high, then proceeded to accumulate and hold shorts until price broke Thursday's low of day. Immediately they covered shorts and went long. Again, "they" are the "smart money."
If you cannot explain it, it is discretionary, which means it is random.
Quoting Pat Chiko
{quote} OK, thank for update. And appreciate your help here for newbie to learn and protect my tiny account. Sincerely PAT
I guess u r not newbie, you are "bid head"
usually starting with MCP=2000 pips!! you will be calm, no worries if market goes against you .. you have an ample time to decide to add one more postion that make MCP =1000 (which is still safe) or to hedge or to exit on small loss . .

Quote
You can transform your trading from trapped retail to so-called "smart money" simply by trading only at market extremes.
+1
yes, that what i exactly do ... Very simple clear S/R (on condition that there is no major event that could break one or two S/Rs)
and if i am lucky and there is a sharp channel, i raise the risk level . .
nothing could defeat sharp channels and envelope-indicator with 2.5% on daily!! but their chances are rare . .
Be yourself
HI PAT
NICE article
HERE SMC E-BOOK HOPE IT WILL HELP
https://www.forexfactory.com/thread/...6#post14304656
Quoting Pat Chiko
Stop Loss Hunting, Manipulation by the Smart Money in Forex Some Forex traders may be unaware of how stop loss hunting and market manipulation is done by the smart money. Who is smart money ? What is smart money ? Where can we find their position in market ?. Is there any study the inner workings of Forex trading, and how stop loss orders are hunted by the smart money. How to get onto study the inner workings in Forex on how stop loss orders are hunted by the smart money. As a Newbie, I would appreciate for someone to shares how Stop Loss, Manipulations...
Hi Pat

The name Smart money is so stupid, it makes me want to punch some one's nose.
The markets have many levels of traders starting from the Newbie and ending at the Big player at the top. There is probably 12-14 levels where as a trader, you have to attack inexperienced traders below your level to be profitable. You can't beat a big player but there is plenty of inexperienced traders below you who make silly trades.

I trade like a Market Maker where I hunt liquidity just above or below spread looking for stupid trades that move away from the true value of an asset. These trades are normally gambles and are targeted by everybody up the line. In other words, once a silly trade gets placed (or a series of them), experienced traders know there will be stops close by and will attempt to trap those traders.

The trap pays when the stops are taken, and a free move is offered rewarding the Market Maker style of trader.
Try looking at the Future's Market to see where they sit, but only after a Cascading Stop loss event has occurred. Stop loss do not sit on the order books till they are converted to Market orders at the spread near Market Execution.

Remember all markets are joined and connected as big players can Buy on Currency markets while hedge on Future markets.

Its important to know Stop losses are used to move the market at no cost to the big boys. The normal bullshit statement (lets use it) is that it takes $50 million to move EURUSD 1 pip during the London session. If a Buyer places a stop loss, they are in fact placing a Sell market order which is hidden from the market but stored on your brokers platform. The big boys can't see them but of course they know approx. where they are. In this case there will probably be a cluster of stop losses so this is what the big boys are aiming for. If the stops sit between a range of say 1.088 to 1.048 - once you hit the top at 1.088 price will cascade down to 1.048 (4 pips) in 0.3 of a second for Zero dollars spend by big players.

Thats a free move thanks to cascading stop losses.

Big guys just want free moves, and a 100% winning trade of a bounce back performed by HFT algo's.

Cheers
Trading thin liquidity at the boundary of the charts
Taking my comments further, fishing for stop losses can be a worthwhile pursuit for the scalper.
One of my playbook trades is to hunt stops on Gold future markets - but it works as well on Forex markets if you also have level 2 data.

When price is extended and nearing a new Daily Bearish Low in a ranging market, the next resistance is likely to be filled with invisible stop loss. I think everyone would probably agree with that statement.

So we go fishing by placing two trades. One is a Sell trade 2 or 3 points lower down with a Buy trade 10 - 15 points lower again.
If price hits a Stop loss pool, it will take my trade & take profit within a split second. If i am wrong, I just take a 10 -15 point loss which is no big deal.

On good days, it will have a success rate of more than 85%.

We need to find a way to use Cascading stop events to our advantage, my next playbook trade I use is also a very high winning trade setup.
Set a Buy on the above example 10-15 points below the top of a resistance level. If a stop loss pool is hit, price will drop 10-20 points or even more in 0.3 of a second. this creates an imbalance of the Order books causing price to rebounce 50% of the drop in another quick move.

This is the trade - the rebalancing of the order books is close to the best trade you will ever get.


This leads me to my last question.

WHAT TRADES ARE IN YOUR PLAYBOOK?
Trading thin liquidity at the boundary of the charts
Quoting Pat Chiko
Where do this so called Smart Money hang out ? Just curious where does the smart money hang out. I've heard of this thing called Dark Pools do many of their transactions and their positions{image} Anyone of you have an access to the dark pools, please Private Message... We can see their positions in there and join in their quest. I understnad that the smart money Players as some kind of cartel they will not trade against each other it wouldn't make any sense similar to the prisoner's dilemma you know in economics they will not end up...
I also do believe that. But their motives are more important. And i think that they stop loss hunt for their long term trades aiming for 3000-5000pips or more(in forex)
Why?
Technical analysis is subjective but fundamentals should be objective, cause these big guys have the power to manipulate the market now or in the next 4hr or on a Daily basis but not a trend preparing to launch for the next 8-15months.
Each big guys together with their automated algorithm, employed Economists experts who did their research and projections, which should be in line with the Central banks projection. So they can be of course wrong for a month or 2, particularly trying to catch the actual turning point of an out of control economic crisis (as for the current market environment we can say price stability- Inflation)
Then they start positioning themselves for the launch of a new trend, when they start noticing actual change in data figure trend; cause thats how they make their real money (through long term trade)
In this case they will need liquidity to enter the market, thats why they SL hunt now to position themselves for their 15 months journey.

From this, i strongly believe thats how a market structure is formed. Because each time the market went into a corrective phase, the market is met with high impulsive interest [high buying interest at higher price for uptrend(produing higher Lows) or high selling interest at lower price in a downtrend(producing lower Highs)]. They move their unfilled long-term order together with the price structure but will always let it filled at discounted price for buy or premium price for sell.

As you mentionned, the cartel will not trade against each other, indeed yes. They will not. This is why, in all Hedge funds' CEOs podcast or books or stories, they all tell you one thing in similar "the trend is your friend" because they know they cannot fight the trend. But that does not meant they cannot stop loss hunt each other, so they get a better entry. This way they also experience drawdowns as reflected in their form 10k, but the amount and number of days they lose is nothing compared to their winners.

Not a professional, just my rookie take.
Trade at good levels or no trade at all!
Quoting RickM
Taking my comments further, fishing for stop losses can be a worthwhile pursuit for the scalper. One of my playbook trades is to hunt stops on Gold future markets - but it works as well on Forex markets if you also have level 2 data. When price is extended and nearing a new Daily Bearish Low in a ranging market, the next resistance is likely to be filled with invisible stop loss. I think everyone would probably agree with that statement. So we go fishing by placing two trades. One is a Sell trade 2 or 3 points lower down with a Buy trade 10 - 15...
I am trying to follow the trade you are describing above but there appears to be a step missing. If I follow the sell trade 2 or 3 points lower you are proposing a sell limit order but what is your take profit rationale that completes the win?
Stubborn, often slow but still learning!
Quoting Pat Chiko
Where do this so called Smart Money hang out ? Just curious where does the smart money hang out. I've heard of this thing called Dark Pools do many of their transactions and their positions{image} Anyone of you have an access to the dark pools, please Private Message... We can see their positions in there and join in their quest. I understnad that the smart money Players as some kind of cartel they will not trade against each other it wouldn't make any sense similar to the prisoner's dilemma you know in economics they will not end up trading...
Darkpools are private broker hosted exchanges. Very difficult to get reliable data since effectively it isn't getting reported to the market until a later date.
Stubborn, often slow but still learning!
Quoting RickM
Taking my comments further, fishing for stop losses can be a worthwhile pursuit for the scalper. One of my playbook trades is to hunt stops on Gold future markets - but it works as well on Forex markets if you also have level 2 data. When price is extended and nearing a new Daily Bearish Low in a ranging market, the next resistance is likely to be filled with invisible stop loss. I think everyone would probably agree with that statement. So we go fishing by placing two trades. One is a Sell trade 2 or 3 points lower down with a Buy trade 10 - 15...
I don't know if your last question was directed to the person that you replied to but i try reply, how i trade as a rookie.

I use psychology, emotions and empathy. Everything is reflected/mirrored in the general state of market. If i am in a chat-room i listen, if i am looking at a interview with Powell i notice what is being said, but also what is not being said.

Then i take a step back and calculate probabilities based on past information, and if the market is sensitive or paralyzed. If the market is paralyzed it is safer in terms of pip movement, but unpredictable in terms of reaction and direction.

Most of the time i'm just studying, observing, i come up with statistical studies i like to perform but they are mostly basic and not anything advanced.
I might for example calculate the daily average range for this time period and compare it to the past.

What works best for me in a day is just looking at the numbers, how they dance, how they hesitate, and look at the news in between.
The numbers speak to me, and i remember them. I make a mental picture of them and imagine them as humans, who have a life just like me and follow a basic mode of operation(going for coffee, meetings, getting low sugar levels, closing business before lunch, anticipate things in advance etc..)

In fact i trade alot of the anticipation of others, and then drop out just before their anticipations are about to be revealed. Then i interpret if their calculations were right or wrong, and then i look at what they do. If they are trying to make a fake move which doesn't correspond to their previous anticipations it makes a great opportunity for me to get in the anticipated direction, while others are in a state of confusion.
#IDDQD Return Today: 11.4%
Quoting Yocam
HI PAT NICE article HERE SMC E-BOOK HOPE IT WILL HELP https://www.forexfactory.com/thread/...6#post14304656
Excellent recommended reading
Stubborn, often slow but still learning!
Quoting Pat Chiko
Stop Loss Hunting, Manipulation by the Smart Money in Forex Some Forex traders may be unaware of how stop loss hunting and market manipulation is done by the smart money. Who is smart money ? What is smart money ? Where can we find their position in market ?. Is there any study the inner workings of Forex trading, and how stop loss orders are hunted by the smart money. How to get onto study the inner workings in Forex on how stop loss orders are hunted by the smart money. As a Newbie, I would appreciate for someone to shares how Stop Loss, Manipulations...
Read Post 31 then anything else that grabs your attention.
This lady has provided masses of free advice for the benefit of all.
Take what you want from it.

https://www.forexfactory.com/thread/...journal?page=2
every Saint has a past. Every Sinner has a Future
Quoting Ferna
{quote} I don't know if your last question was directed to the person that you replied to but i try reply, how i trade as a rookie. I use psychology, emotions and empathy. Everything is reflected/mirrored in the general state of market. If i am in a chat-room i listen, if i am looking at a interview with Powell i notice what is being said, but also what is not being said. Then i take a step back and calculate probabilities based on past information, and if the market is sensitive or paralyzed. If the market is paralyzed it is safer in terms of pip...
Hi Ferna

You know and I know what I am going to say next because you are putting me into a corner where there is only one answer.

You anticipate where there is weakness and trade accordingly.

Bloody Excellent
Trading thin liquidity at the boundary of the charts
Quoting dantpm
{quote} I am trying to follow the trade you are describing above but there appears to be a step missing. If I follow the sell trade 2 or 3 points lower you are proposing a sell limit order but what is your take profit rationale that completes the win?
A take profit 10 - 15 points lower.
Trading thin liquidity at the boundary of the charts
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