Brokers don't hunt for your stop loss

This is true for regulated brokers in major financial countries.

The only traders who complain about the broker hunting stop loss are those who are rookies, have no proven strategy, and/or are using a shady broker.

If you are using the services of an unregulated broker from a trusted country, then there is a possibility that you will experience some unusual price fluctuations. When you see this phenomenon, please quickly arrange and switch to a reputable broker to do business immediately!

And rest assured, with legal brokers, strictly regulated, they really don't care about your stop loss. In fact, they make a lot of commission if you don't get stopped and keep trading. So there's no incentive for them to hunt for your stop loss and burn your account.

Even if they are a market-making broker, they do not "trade against you". They simply provide liquidity to their customers.

... And since more than 90% of traders lose money on their own, market makers don't need to hunt for stop losses either. The odds were inherently very beneficial for them.

If you are really worried about the broker trading against you, then please use services from an ECN broker!

So who is the retail trader stop loss hunter?


Stoploss hunters really must be great organizations!

Banks, hedge funds, and other institutions have the capital to temporarily push the market above important price thresholds. Large institutional traders cannot enter their trades at the same time (unlike retail traders).

When a large order enters the market, it moves the market in the opposite direction of the transaction. This is because not many traders enter the opposite direction, at that price level. Therefore, a trader with large orders must pay more for the transaction to be executed.

It's a liquidity problem - That is, there is not enough liquidity to absorb large trading.

To avoid this, large traders break their trades into smaller chunks. Alternatively, they can also push the market in the opposite direction, to hunt for some stop loss and clear the liquidity in the direction of their desired trade.

Here is an example of stop-loss hunting on the chart:


Similar to what Paul Rotter does in the bond market, he will enter a large pending order in one direction and when the traders try to execute that trade, he will quickly cancel the order and join the transaction in the opposite direction.

So how to avoid stop loss hunting?

Can you completely avoid stop loss hunting? Of course not, but there are a few things you can do to minimize its negative effects.

Use Price Action as a confirmation signal

Only enter into a trade when you see the price react in a way that is consistent with what you think the market will act on. The bottom line is, you will never know whether support or resistance will hold or not as it is in fact an uncertain zone.

So wait until the market teases and gives you a clue of what it will do next.

One type of confirmation signal is accumulating below support.

Once the price bounces above it, this can be a good confirmation that the price is likely to be about to reverse.


Don't put the stop loss too close to the entry point

Retail traders tend to be greedy and do not want to lose too much. They often dream about trades that are 10R and constantly stop out.

Now, there are some profitable trading strategies with very low win rates and super high profits per trade. But most traders wouldn't like such a low win rate.

So, set the stop loss at the level that allows the price to have "breathing room" and enough to show you that you were wrong about your trading idea.

Avoid placing stop losses at clear price thresholds

New retail traders often prefer to place stop-loss orders in the circle (00) or (50). Those price levels can act as support and resistance.

So, whenever possible, deviate your stop loss from those obvious price levels!

"The more touches, the more reliable"

Some educators teach that the level of support or resistance is more reliable if it is touched multiple times, on the same side.

Like this...


In fact, when the price action hits a threshold too many times, it is more likely that the price will surpass that level.

Even in the above example, only the second touch from the left turns into a really good deal. Other traders may have been profitable, but they weren't nearly as good.

Therefore, the more times a price threshold is touched, the more it is a leading candidate for a reversal or a stop run.

Draw exact price thresholds

You may be tempted to draw a line on a chart and feel like the price has to respect that level.

But the reality is that the resistance/support levels are all uncertain areas.

Here is an example:


If you set the exact stop loss at the line you plotted on your chart, there is a high chance you will get a stop out. But if you place the stop loss on the other side of the resistance/support area, then it could be a much safer place to place a stop loss.

... And if the price gets to that point, you'll be sure you're completely wrong about your initial judgment.

Trading the "specter" EA

Trading software that hides your stop losses can be useful in some situations, such as when you don't want other traders to copy your trades.

But it won't help, in this case ...

If you set your stop loss at an obvious level or set it too close to your entry point, you will still get a lot of stop loss.

But using this type of software can be a good exercise for traders who believe that their broker is hunting for their stop loss. When you hide stops from your broker and they are still triggered frequently, it is your fault ... not your broker.

Psychological stoploss

If your stop-loss has been placed in the wrong position, it doesn't matter whether your stop-loss is in your head or in your trading platform.

A psychological stop loss can be even worse because there may be a tendency to disrespect the stop loss, or you may be leaving the computer when the stop loss is stuck.

So don't think putting a stop loss in mind will improve your performance. Most likely, it will make your results worse!

Epilogue

A reputable and regulated broker will not hunt for your stop loss. It is not in their favor!

But if you're still frequently stopped out, then there are other factors that might be causing this. Take a moment to review your trading logs and find out what's really going on.