Confused about stop hunting

I've constantly come across the idea of stop hunting. If there is a detailed thread of this that has already answered these 2 questions, please feel free to direct me to it, as I have searched but didn't find anything regard 2 questions:

1. Who is hunting?
2. Who are they hunting?

1. I'm assuming the market makers are the only ones big enough to really push the markets around enough to hunt stops.

Which brings us to who are they hunting:

2. I'm assuming that retail traders are too small to bother with. I mean even if our stops are easy to pick off, is there enough volume to worry about us? So I'm guessing it's not us they're after.

Do commercials use stops? It would seem that if they wanted the actual currency, they wouldn't close out the trade just because price moved against their original price. So I'm assuming that it's not them.

So there are larger traders... hedge funds? Would they place stops at obvious levels like a retail trader? If they do, then it would make sense that maybe market makers would hunt their stops, as (again I'm assuming) their size of trades would make it worthwhile. That said, wouldn't they (larger traders) be more savvy to not place their stops at obvious levels? If they are savvy who is being hunted?

Thanks
Joe

As per your PM request
here's a view.

stops sweeps are normally instigated by trade scalpers.
They can be market makers, brokers or syndicated professionals.
Scalpers are traders who lean on paper for theoritical edge.
In Futures exchanges , they are known as locals.

The process is very simple, if you want to understand, then read about scalping markets and leaning on orders.

regards

Don't underestimate the speculative activity in the FX market, it's huge and a big portion of speculators use stops, whether those stops are visible or not.

As fti noted, it can be anyone who does have the ability to move the market towards a certain level taking advantage of thin or expected thin liquidity...I would really exclude market makers from this as they probably don't have enough liquidity to move the market a lot, though some might have.

It is harder to hunt stops in an OTC market rather than an exchange. Again as fti mentioned, locals (or floor traders) are the ones who were famously known for stop hunting on futures exchanges. Locals or floor traders are typically scalpers as fti mentioned. They are usually in and out of the market in a matter of minutes rarely couple of hours. Because they trade big volumes, they only need to catch several few points, typical scalping activity.

There is no hard rule, sometimes it happens obviously and some other times, nothing really happens. Sometimes, the stop hunting goes as planned, other times, the stop hunter(s) get in real trouble facing another large player who was having a big iceberg order just before the stops.


Regards,

Nader

The price doesn't need to go to stops per say...
If most of the stops aren't visible....
Price will go against the heavy liquidity in the market....
And eventually hit the stops on the opposite side....

FX market is OTC - it's not so true....
All the major banks and big investment are connected...
So most of the liquidity for majors is centralized...
This makes understanding price action clear....
But, the retailers don't have that info....

Anyone who A) needs the liquidity the stops provide and B) are large enough to move price.

Also keep in mind that way too much is made of the super liquid $3t forex market. In reality anyone with a 6 figure account can move price because at least 50% of the $3t is multiple hedges of the same transaction. Disperse that 50% over a dozen or so common crosses and divide that by 24 hours and the net result is a hell of a lot more stop hunting activity then is commonly assumed.

Obviously the more capital someone has, the farther they can move price and subsequently the more they will NEED to hunt stops in order to facilitate their trading strategy.

The one party who is noticably NOT involved in stop hunting is your common retail broker/dealer. The harsh reality is that it's just too damn risky for them to try.


Tech traders mostly, but really anyone who divulges their trading information. Option buyers are ripe for exploitation as an example.

Hope it helps.

1. Usually banks, big speculative MM or institutions and every trader who jumps on the train.

There are a dozen of different stop hunting pattern in order flow trading.

Under certain conditions you can hunt stops from market makers.
That occurs i.e. when informed "big" traders accumulate liquidity and initiate an up-move with heavy demand.
Serveral MM were trapped and have to cut their inventory.

It's not the right question at which round numbers are stops or that kind what you hear from the media,
because every participant acts different.
It's about the size of the weak positions (pool) that is distributed on various price levels.


Therefore the prey can also be the big guys.

Wanna avod this stuff move to larger timeframe's they not gonna hunt there own stop. Since the electronic trading lower time frames are getting harder for newer traders. So better move higher.

What Darkstar said.

I think stop hunting is a bit of a misnomer. It implies people are looking only for stops (as in stop loss). I think it is more like order hunting. Hunting to get a better price to be in/out of a trade.

Market makers are just market makers..they dont need to hunt anything. A simple "no market maker bids found" can cause a price change.
Hunting requires fore knowledge ie where the orders exist. It can be argued that we dont know forex orders cause of OTC market. True but think carefully, there are group of people who are a bit predictable.

Darkstar has mentioned them.

Order Hunting it is.

@Darkstar - Long time no see. Sent you a pm way back in Nov, awaiting reply.

Darkstar used to have a thread that coverd this topic.... don't remember the name of it.... but it has been removed. It was on damn fine piece of writing for anyone trading fx, and we are the poorer because it has been removed. If you want to know about order flow and stop hunting, and you were lucky enough to have Darkstar respond, close the thread and leave it at that. And reread his post several times to really understand what he is saying.

Regards,

Just curious, why has it been removed?

Ah! the legend of the hidden thread. FF's own myth. Yes, there was a thread called "Ohh Sweet liquidity". But with all respect to DS (he has helped me look things differently) the myth of hidden money in orderflow is just funny.
Read his post again, there is all the info you need.

I believe it was removed cause DS believes in... "Give a man a fish; you have fed him for today. Teach a man to fish; and ....."

Forex is a decentralized market. Retail brokers generally don't pass through the orders to the interbank market, meaning that they take positions in the opposite direction to their clients. Stop hunting to me has two different meanings. One is already explained by others, the other I didn't see listed, and is the action of retail brokers to provide quotes that deviate from interbank prices, in order to take out their clients' big positions. This actually is quite a fraudulent practice.

In practice, sometimes you'll see people post live charts of one broker with strong spikes in prices, while other brokers' prices did not spike.

I understand.

Noloqy, from my perspective that is a true stop hunt. It is a fradulent practice. I think the other part being discussed here is more of a order hunt as it might/might not amount to a true stop hunt.

Well, this is not the case in most of the cases. After all, Retail brokers need to manage their currency exposure to avoid potential losses, so in some cases they will need to transfer their exposure to someone else.

Majority of Retail Brokers don't have access to the interbank market, however, there is always a bank-customer relationship, which can typically be used by Retail brokers to square their positions.


Regards,

Nader

I believe it was removed at his request.

Regards,

If anyone with deep pockets can move the market then why does the BOJ and SNB have such a hard time pulling intervention off on their own?

Because the goal of an intervention is usually to slow or stop a tremendous amount of momentum for a measurable length of time. On the other hand, a large fund etc. that is attempting to move the market is merely trying to nudge the market a little in order to get a better entry/exit price. And they can do it. If they couldn't, there would be no need for them to break their larger transactions into smaller hunks when they don't want to move the price against them.

Intervention happens when the banks see their currency appreciating/depreciating too fast. And it happens against the general market view. The market is saying the currency has gained/lost clout, it doesn't care if it has reach a low/high...price discovery keeps on happening. So even with all the intervention people hold on to their belief. Plus it provides a way to mint money off the bank's back.


Bigger people are more nefarious, the stop hunts are just for getting better prices which doesn't necessarily happens to be against the general market view.

Finally, you can chalk it up to "knowing your enemy". Before intervention happens there is lot jaw boning, chatter and some educated guesses. When a stop hunt happens you wont even come to know what hit you before it happens.