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Beat brokers at their own game - trading round figures

  • #1
  • First Post: Aug 6, 2010 12:47am Aug 6, 2010 12:47am
The best indicator ever invented is the mark 1 human eyeball!

Robots can never and will never beat the human eye for spotting trends.

The simplest way is to trade how brokers trade - by hunting stops!

Humans LOVE round figures, and traders TEND to trade round numbers, so simply set your trades +/- 10 pips either side of a round number!! (round numbers are considered at 100 pips)

eg.
say £/$ is 1.53056

Therefore round figures would be 1.5300 (to 4 dp)

therefore you would set your next BUY at 1.5390, with a SL of 20pips, TP 20 pips

HENCE

BUY 1.5390, SL 1.5370, TP 1.5410
SELL 1.5310, SL 1.5330, TP 1.5290

for currencies like £/yen with - Say the current priceis 135.67 :

BUY 135.90, SL 135.70, TP 136.10
SELL 135.10, SL 135.30, TP 134.90


If you were really inclined, you could set up 5 currencies, with buy and sell signals (take around 5-10 minutes) then come back next day and see how many came off!

Remember - this is working on human psychology - it only works because HUMANS are making the trades!!!

IT REALLY IS THAT SIMPLE!!!!
  • #2
  • Aug 6, 2010 1:04am Aug 6, 2010 1:04am
Quoting psgm
The best indicator ever invented is the mark 1 human eyeball!

Robots can never and will never beat the human eye for spotting trends.

The simplest way is to trade how brokers trade - by hunting stops!

Humans LOVE round figures, and traders TEND to trade round numbers, so...

YOur assumption are reasonable.

But, if we consider this round numbers as S/R levels, would not be wiser selling just below a resistance and buying just above a support?

Using your example would be:

eg.
say £/$ is 1.53056

SELL 1.5390
BUY 1.5310
  • #3
  • Aug 6, 2010 3:27am Aug 6, 2010 3:27am
Quoting Bostan
YOur assumption are reasonable.

But, if we consider this round numbers as S/R levels, would not be wiser selling just below a resistance and buying just above a support?

Using your example would be:

eg.
say £/$ is 1.53056

SELL 1.5390
BUY 1.5310
I think you have missed the point I am trying to make. .00 IS a resistant / Support line - always has been always will be!!

You open just before s/r is hit by 10 pips and claim the 20 pips either side of the s/r level (above 10 + below 10 = 20 pips!)

I have tried this out over all the majors, and it holds true - (GJ always like to have larger stops, as is more erratic - but the principal still holds)

Because you are working with key psychological areas of S/R timeframe used is irrelevant!!
  • #4
  • Aug 6, 2010 3:50am Aug 6, 2010 3:50am
Quoting psgm
The best indicator ever invented is the mark 1 human eyeball!

Robots can never and will never beat the human eye for spotting trends.

The simplest way is to trade how brokers trade - by hunting stops!

Humans LOVE round figures, and traders TEND to trade round numbers, so...
The numbers are slightly different (85 and 15) but the principle is the same I believe.....

http://www.investopedia.com/articles...topHunting.asp

-
  • #5
  • Edited 8:58am Aug 6, 2010 8:53am | Edited 8:58am
If you are not really using your eyes to spot anything but round numbers, couldn't an EA be written to do that? I don't trade EAs, but it seems like if all parameters (entry/exit) are always the same at round numbers, it would be easy enough to program something to do that automatically...
  • #6
  • Aug 6, 2010 8:56am Aug 6, 2010 8:56am
Quoting moneymaker2
If you are not really using your eyes to spot anything but round numbers, couldn't an EA be written to do that? I don't trade EAs, but it seems like if all parameters (entry/exit) are always the same at round numbers, it would be easy enough to program something to do that automatically...
There's an idea, anyone volunteering to write one?
  • #7
  • Aug 6, 2010 9:12am Aug 6, 2010 9:12am
I'm sure it would be probably be the easiest EA in the world to code - as it doesn't have to do any math! I would gladly try that out if anybody knows how to go about it

Indeed you are probably right that this method exists (I suspect someone somewhere has tried every single method)

The reason I choose +- 10 is simply because I (as I used to scalp and used the volatility of GJ to get me my pips quickly) and that has caught me out a few times when I was trying this new style of trading - and besides 20 pips a throw 5 times a day - 100 pips/day will do me just fine!!
  • #8
  • Aug 6, 2010 9:14am Aug 6, 2010 9:14am
Quoting psgm
I'm sure it would be probably be the easiest EA in the world to code - as it doesn't have to do any math! I would gladly try that out if anybody knows how to go about it

Indeed you are probably right that this method exists (I suspect someone somewhere has tried every single method)

The reason I choose +- 10 is simply because I (as I used to scalp and used the volatility of GJ to get me my pips quickly) and that has caught me out a few times when I was trying this new style of trading - and besides 20 pips a throw 5 times a day - 100 pips/day...
nearly forgot - recently discovered Dukascopy have lowered their account opening size to $1000. With one of the lowest spreads around, and definitely one of the most reliable brokerages around - methinks a broker migration is in the cards!!!
  • #9
  • Aug 6, 2010 10:39am Aug 6, 2010 10:39am
Quoting psgm
The best indicator ever invented is the mark 1 human eyeball!

Robots can never and will never beat the human eye for spotting trends.

The simplest way is to trade how brokers trade - by hunting stops!

Humans LOVE round figures, and traders TEND to trade round numbers, so...
So your broker really moves the entire market to take out your tiny little stop order? Why would he do that? What is the advantage/disadvantage of knowing where stop orders are and trading with them?
  • #10
  • Aug 6, 2010 11:04am Aug 6, 2010 11:04am
Whole numbers are a staple in my market trading strategy and analytics. Whole numbers are not new but it seems traders are just picking up on the concept. I realized whole numbers about 10 years ago trading equities, when I realized price seems to reverse on them.

Whole numbers by themselves will not make you a profitable traders. My entry catalyst is based on reversal bar formations on whole numbers. Equities seems to respond better of whole numbers as in forex, you'll often see price overshoot/undershoot a whole number level. Which is where reversal bars come in, in help determining an entry point (using only stop/limit orders as entry).

Whole numbers in forex you need to pay attention to is: 00 & 50. No matter what pair you trade, price will always respond off a 00 or 50 (i.e 1.5100 or 1.5150).
  • #11
  • Aug 6, 2010 11:12am Aug 6, 2010 11:12am
Quoting psgm
nearly forgot - recently discovered Dukascopy have lowered their account opening size to $1000. With one of the lowest spreads around, and definitely one of the most reliable brokerages around - methinks a broker migration is in the cards!!!
A friend of mine was overly excited about Duska's new low entry rate. He quickly jumped on that deal. I'm looking forward to get his review on it. Duska's clients rate will jump up ten folds because of this.
  • #12
  • Edited 11:30am Aug 6, 2010 11:20am | Edited 11:30am
Quoting psgm
I'm sure it would be probably be the easiest EA in the world to code - as it doesn't have to do any math! I would gladly try that out if anybody knows how to go about it
Sorry, can't help, I'm IT challenged!


Quoting psgm
The reason I choose +- 10 is simply because I (as I used to scalp and used the volatility of GJ to get me my pips quickly) and that has caught me out a few times when I was trying this new style of trading - and besides 20 pips a throw 5 times a day - 100 pips/day will do me just fine!!
lol, yep 100 a day would do it!

I think it's a useful thing to remember anyway even if it's not traded as a strategy, especially for stop placement.
  • #13
  • Aug 6, 2010 12:18pm Aug 6, 2010 12:18pm
Quoting pipmutt
Sorry, can't help, I'm IT challenged!
I could do it for FxSpyder no MetaTrader, in fact it just gave me a trading idea : trading reversals around round numbers. Should be easy enough to program and it would avoid the huge mass of false signals.


Quoting pipmutt
lol, yep 100 a day would do it!
Sounds high to me if there's only one pair in play. What would you consider a normal day for you performance ?
  • #14
  • Aug 6, 2010 12:47pm Aug 6, 2010 12:47pm
Quoting Intensity
I could do it for FxSpyder no MetaTrader, in fact it just gave me a trading idea : trading reversals around round numbers. Should be easy enough to program and it would avoid the huge mass of false signals.
That would be good, I think FxSpyder works with a few brôkers doesn't it?


Quoting Intensity
Sounds high to me if there's only one pair in play. What would you consider a normal day for you performance ?
For this strategy? I don't trade it as a strategy so couldn't say (psgm might), but why limit it to one pair?
  • #15
  • Aug 6, 2010 2:47pm Aug 6, 2010 2:47pm
I think "stop hunting" doesn't exist in the way it is mostly discussed here.

Sure many stops get hit but it is a normal byproduct when the banks are buying currencies.

They don't give a damn about where the small retail guys put stops because they have the order to buy or sell a special currency.

And the most orders never see the real interbank market.
They stay in the market maker order books (MM brokers).
  • #16
  • Aug 6, 2010 4:02pm Aug 6, 2010 4:02pm
I tty one currency at a time simply to test out how it works for real. Once the principal was establiched it can be used on ANY currency pair.

I therefore generally stick to low spread currencies with this.

As a rule of thumb between say 3 currency pairs you should be able to reach key levels 5 times - with 20 pip per successful trade that would equate to 100 pips!
  • #17
  • Aug 6, 2010 5:23pm Aug 6, 2010 5:23pm
Quoting UnnamedPlayr
I think "stop hunting" doesn't exist in the way it is mostly discussed here.

Sure many stops get hit but it is a normal byproduct when the banks are buying currencies.

They don't give a damn about where the small retail guys put stops because they have the order to buy or sell a special currency.

And the most orders never see the real interbank market.
They stay in the market maker order books (MM brokers).
stop hunting exists but as you say not in the way ppl think here they dont chase just one stop . trendlines how many times have you seen a trendline overshoot just to go the way you thought 5 minutes later how many times has your stop been taken out only to go in the original direction straight away do you think you were the only person in the world watching them pin bars or any p.a setup? round numbers are easy for humans to remember(and easier for bankers to write on there order sheet lol)which is why theres always reactions at them but its hard to pick what the reaction will be. i in fact tried this strategy it was 50/50 when i tried but i may of be missing an important factor. i tend to miss the obvious stuff at first

regards damien
i pull the trigger when others are fearful---me
  • #18
  • Edited Aug 7, 2010 12:14pm Aug 6, 2010 7:53pm | Edited Aug 7, 2010 12:14pm
A lot of unfounded speculation here:

1) That brokers hunt stops. They don't because they don't move the market. Dealers at major dealing banks are the ones hunting stops.

2) That as soon as price is close to a round number the probability is larger than 50% that there's are stops and buy orders close on the other side. Simply not true.

Stops aggregate below/above support/resistance levels that are considered solid and a break of which would signal a change, be those round numbers or not.

For example, today stops were taken out above 1.5960 in sterling.

3) That stops are small, that they are the only thing driving the market around these levels, and that buy/sell orders small.

Sterling went 39 pips above 1.5960 before reversing. It ended 30 pips below, and this is not unlikely the beginning of a retracement down to 1.55, so a possible opportunity for a long-term position.

Certainly it happens that the round number areas act as reversal zones, at which times the trades suggested could be profitable, but I would recommend that some statistics or backtesting be done in support of the "IT REALLY IS THAT SIMPLE!!!!" statement, rather than "I try one currency at a time simply to test out how it works for real" before committing too much time and energy on this.
  • #19
  • Aug 6, 2010 8:23pm Aug 6, 2010 8:23pm
Quoting medici
A lot of unfounded speculation here:

1) That brokers hunt stops. They don't because they don't move the market. Dealers at major dealing banks are the ones hunting stops.

2) That as soon as price is close to a round number the probability is larger than 50% that there's are stops and buy orders close on the other side. Simply not true.

Stops aggregate below/above support/resistance levels that are considered solid and a break of which would signal a change, be those round numbers or not.

For example, today stops were taken out above 1.5960 in...

well said my friend
  • #20
  • Aug 6, 2010 10:53pm Aug 6, 2010 10:53pm
Quoting medici
1) That brokers hunt stops. They don't because they don't move the market. Dealers at major dealing banks are the ones hunting stops.
Yeah I think that was a mistake on the OP's part, I don't think he meant 'brokers' as in FXCM, GFT, Oanda etc etc

Quoting medici
2) That as soon as price is close to a round number the probability is larger than 50% that there's are stops and buy orders close on the other side. Simply not true.
We can't say, no-one can. Different levels are probed for sure, including round numbers. Price action around these levels would suggest orders are clustered there.

Quoting medici
Stops aggregate below/above support/resistance levels that are considered solid and a break of which would signal a change, be those round numbers or not.
I'm not sure stop running is an attempt to change market direction. Your example below is a classic one......

Quoting medici
Sterling went 39 pips above 1.5960 before reversing. It ended 30 pips below, and this is not unlikely the beginning of a retracement down to 1.55
If 1.5960 was a significant resistance level then it's reasonable to assume stops on short positions were clustered above it, as well as Buy orders. If you were an institutional trader capable of moving price (in the short-term) and you planned on selling Cable longer-term where would you rather sell it, at 1.5960 or at a higher price? A higher price obviously. Your strategy might then be to trigger orders above 1.5960 to add to momentum to the upside and create liquidity, then sell the spike, hopefully triggering stops on long positions on the way down. Seems like a logical way to do things. We can only speculate about player's motives and strategies but it's feasible. Price broke above 1.5960, triggered orders, spiked higher, then sold off. Isn't that a perfect scenario if you were a trader looking for a better price to sell?

Quoting medici
Certainly it happens that the round number areas act as reversal zones, at which times the trades suggested would be profitable, but I would recommend that some statistics or backtesting be done in support of the "IT REALLY IS THAT SIMPLE!!!!" statement, rather than "I try one currency at a time simply to test out how it works for real" before committing too much time and energy on this.
Price action at round numbers frequently seems to be the same as price action around the example you posted, certainly frequently enough to warrant looking at. I agree though, some statistical analysis would be more convincing!

I think Boris Schlossberg's article on stop hunting with the big players explains the strategy quite well, it's worth reading in my opinion.
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