Stophunt, also known as stop-loss hunting, is a frequent phenomenon in the forex market. But the fact that these stophunts are not made by Broker, exactly created by Market Maker. This is the component that creates the stophunt, even a lot of the other, with the aim of scanning the stop loss and making money.

There are 2 things you need to know about stop hunts:
  1. You must learn to avoid being stopped. Therefore, you need to know how the big players think and trade.
  2. You have to learn how to profit from stop hunts by trading in the same direction as the big players.
How smart traders hunt stop loss

1. Create a price trap

Getting retail traders to trade in the direction they want is very simple.

For example, when you see prices approach a support level, you will want to buy there. But when you see the price breakthrough that supports and it doesn't look like this support is holding it.

The ideal scenario for smart traders is for a retail trader to buy at support but then they will have to cut loss because the price breakout of the support threatens their stop loss.

Next, a lot of traders will find a way to sell on the support breakout (which is actually a false break). But then the price will rise again, causing the traders who sell on the breakout to stop losing. This will cause prices to increase even more. And ultimately profits belong to smart traders. Loss-losing traders will continue to be like this until they know they stop losses and learn to avoid them.

2. Activate the psychology of greed and fear

This is another way of creating a price trap, but it plays out differently on your charts.

Assume the price is currently at 110 and continues to drop to the strong support at 100 and probably 90% of all traders want to buy. Then you will see a very frequent case of price reacting to this threshold. Up to 102 the price started to react and rose a few pips causing impatient amateurs to worry and fear that the price has found support and moved up while they have yet to enter.

The big players understand this very well and make it up to their advantage. They cause amateur traders to order early even though the price has not yet reached the support level.

At this point, the big player pushes the price lower even further, creating panic among the traders who previously traded, causing them to exit in losses.

Tips on how to avoid stop hunts

To avoid stop hunts, you can use the following tips:
  • Don't use obvious stops. Large circular numbers or strong support resistance are not a good stop loss.
  • Research shows that the price tends to move faster after breaking through the circular numbers, implying that stop-loss orders further favor the trend.
  • Stop-loss orders are usually concentrated in price areas with a tail number of 00.
  • Add a pip range (depending on timeframes) to avoid a stop loss.
  • The more people gathered in a certain area, the harder it is for you to profit from it.
  • Add a column in your transaction log that records how prices went against your judgment. This will help you get a better stop loss.