Is stop loss hunting avoidance worth it?

Hi,

I've read some articles that say that one of the ways to avoid having your stops taken out by stop hunters is to widen your stops, thereby keeping them away from where hunters would expect the large pool of stop losses to be. For example, on a reversal trade, since hunters expect the pool of stops to be within, say, 10 pips of support or resistance, set your stop 15 pips away.

The issue: On the one hand, by widening your stop, it might be missed by the hunters more often than otherwise and you'll stay in more trades instead of losing your stop loss cash value each time. On the other, each time you widen your stop you're reducing your pip value; so if you win the trade, you'll end up with less profit.

Question: Which would be better in the long run, to place stops in the expected place and get stopped out by hunters more often while earning more on the trades you win, or to widen your stops, thereby keeping you in more trades, but earning less on each of those trades?

Thank you,
Norm

I take it your talking about forex trading...just take a step back to summarise for a second...its one of the biggest markets in the world with multi billion pound hedge funds banks and other institutions trading trillions of £ per day... now, tell me who are these so called stop hunters that can move this size of a market in their favour to make a few hundred quid by hitting your stop ?

The market moves following supply and demand, unfortunately it will not respect your stoploss, it will plough right on through regardless where you place it....

Hi Mike,

Yes. Forex. Read closely. I did not say just my stops. I said "pools of stops" - millions of dollars worth. Here are some articles: https://www.jarrattdavis.com/forex-brokers-hunt-stop-losses/; http://www.forexfactory.com/showthread.php?t=23495; http://www.investopedia.com/articles/forex/06/stophunting.asp?lgl=bt1tn-above-textnote; https://www.luckscout.com/stop-loss-hunting-by-forex-brokers-what-to-do/. Schlossburg and Davis, for sure, made millions in Forex, and they should know what they're talking about.

Norm

Or take it a step further - pools of supply and demand. So if there is a need for either and you can detect this, then we dont want to be trading at this point in time. The chances are; if you are worried about the stop area , you are more than likely to be too early in taking the trade. This point alone will greatly improve a traders chance of being net positive over a decent amount of trades.

So there are two types of traders in this world: retail traders & institutional traders. Retail traders are individuals who trade on their own, with their own capital, based on their own analysis. Institutional traders are often professionals, who trade hundreds of millions of dollars of a firm's capital, based on the analysis from the firm's research departments. Upwards of 90% of retail traders lose money trading Forex, which means upwards of 90% of institutional traders are making money.

Surely such institutional traders know how the retail traders think and where they might be entering into the market and putting their stop losses. In addition many of them have access to order books and can see entries and stop losses. So rather than trying to trade like the retail traders and getting your stop losses "hunted", why not try to trade like the institutions.

Perfect example... the "head and shoulders" pattern. It is a very retail minded trade. Many retail traders use this pattern to enter into the market, but essentially it is just a break out trade. The point at which price breaks out of the head and shoulders pattern is where many traders enter into the trade. If the trade goes in their favor many put their stop to break even.... or the point at which price broke out of the pattern. It is not a coincidence that you often see price very quickly come back to that point and "retest it". It is retesting the level for a reason... to stop out those short sellers with their stops at break even (essentially triggering buy positions) that the institutions will sell to for an optimal entry.

Think like an institution, not like a retail trader, and you will see a massive improvement in your trading.

[QUOTE if you are worried about the stop area , you are more than likely to be too early in taking the trade. This point alone will greatly improve a traders chance of being net positive over a decent amount of trades.[/QUOTE]

Great point, WSW. Thanks!
Norm

[QUOTE So rather than trying to trade like the retail traders and getting your stop losses "hunted", why not try to trade like the institutions. [/QUOTE]

Thank you, Unique Forex. I'd like to learn more about trading like the institutions. Any more you can tell me about that would be greatly appreciated - and/or any leads to good web articles or other literature on it. I'll do my own research on it, but if you've got something right off the top of your head, I will definitely follow up on it.

Thanks again,
Norm

Well







Better to be the one giving the bullets than taking the bullets

TraderNorm said:

Hi,

I've read some articles that say that one of the ways to avoid having your stops taken out by stop hunters is to widen your stops, thereby keeping them away from where hunters would expect the large pool of stop losses to be. For example, on a reversal trade, since hunters expect the pool of stops to be within, say, 10 pips of support or resistance, set your stop 15 pips away.

The issue: On the one hand, by widening your stop, it might be missed by the hunters more often than otherwise and you'll stay in more trades instead of losing your stop loss cash value each time. On the other, each time you widen your stop you're reducing your pip value; so if you win the trade, you'll end up with less profit.

Question: Which would be better in the long run, to place stops in the expected place and get stopped out by hunters more often while earning more on the trades you win, or to widen your stops, thereby keeping you in more trades, but earning less on each of those trades?

Thank you,
Norm

Click to expand...

Wide or tight stops you are going to have losses , if you dont have losses then you are a bad trader , look at the very profitable HFT operations , they dont have many losing days in years but half their trades are losses .

Dont avoid losses per se but concentrate on winning bigger than your losses . The market doesn't differentiate between stops and TP orders its all in your imagination , so when the market drops to 10000 it could be an area filled with TP orders .

The difference between a stop and a tp as I see it is :-

a stop is aimed at a place worse than the last price.
a tp is aimed at a place better than the last price.

if

worse = less favourable
better = more favourable

then we as tarders can choose to try and do ourselves a favour, or do somethin else

TraderNorm said:

Hi,

I've read some articles that say that one of the ways to avoid having your stops taken out by stop hunters is to widen your stops, thereby keeping them away from where hunters would expect the large pool of stop losses to be. For example, on a reversal trade, since hunters expect the pool of stops to be within, say, 10 pips of support or resistance, set your stop 15 pips away.

The issue: On the one hand, by widening your stop, it might be missed by the hunters more often than otherwise and you'll stay in more trades instead of losing your stop loss cash value each time. On the other, each time you widen your stop you're reducing your pip value; so if you win the trade, you'll end up with less profit.

Question: Which would be better in the long run, to place stops in the expected place and get stopped out by hunters more often while earning more on the trades you win, or to widen your stops, thereby keeping you in more trades, but earning less on each of those trades?

Thank you,
Norm

Click to expand...

The answer is simple: Don't think about that. Stop Hunting doesn't exist in its simple meaning but if it exists only in DYNAMIC version - I mean it depends on current market sentiments (which depends on N other factors) and can be at any level. Putting it in a strategy simply brings more confusion because you start to consider one more unnecessary factor. And anything what complicates your system - works against you.
Use plain principle of of putting SL somewhere away from round numbers and .500 levels. Unless you want to analyze your every trade using this principle will save you a lot of time.

TraderNorm said:

[QUOTE So rather than trying to trade like the retail traders and getting your stop losses "hunted", why not try to trade like the institutions.

Thank you, Unique Forex. I'd like to learn more about trading like the institutions. Any more you can tell me about that would be greatly appreciated - and/or any leads to good web articles or other literature on it. I'll do my own research on it, but if you've got something right off the top of your head, I will definitely follow up on it.

Thanks again,
Norm

Click to expand...

You can follow our trading journal thread that we just created. Perhaps you can learn by example.
http://www.trade2win.com/boards/tra...rice-action-trading-institutional-levels.html
There won't be much out there it isn't necessarily a trading "method" it is just a mindset and beyond that it is the specific key levels. We have access to certain institutional research, but we don't feel that is necessary to be successful. As long as you can think like an institution you can greatly improve your trading.

TraderNorm said:

Hi Mike,

Yes. Forex. Read closely. I did not say just my stops. I said "pools of stops" - millions of dollars worth.
Norm

Click to expand...

So, what you are saying is, If these pools of stops were not there then the market would not reach these levels correct ?

For example.. When the commercial traders take a 50 million dollar position in gbp/usd they usually buy in blocks, 5-10-15 mil blocks in order not to spook the market to much, then have a ceiling price as to when to stop buying as the market price rises, they also have a price where to start the
selling process....your stoploss could be anywhere in between these prices, so could your entry and TP order...your literally just riding a wave, it may workout in your favour it may not. Nobody can move the market just to hit pools of stops, As mentioned earlier there are also TP and entry orders at these same levels...think about it.

tar said:

Wide or tight stops you are going to have losses , if you dont have losses then you are a bad trader , look at the very profitable HFT operations , they dont have many losing days in years but half their trades are losses .

Click to expand...

I know what you're trying to say with that bolded part but that really sounds like missing the whole point of trading in the first place

A trader without losses is the best trader of all.

myattitude said:

I know what you're trying to say with that bolded part but that really sounds like missing the whole point of trading in the first place

A trader without losses is the best trader of all.

Click to expand...

Check these guys , half of their trades are losses but nearly no losing days in years ...

http://www.trade2win.com/boards/trading-systems/220454-how-its-done-virtu.html

tar said:

Check these guys , half of their trades are losses but nearly no losing days in years ...

http://www.trade2win.com/boards/trading-systems/220454-how-its-done-virtu.html

Click to expand...

so if you now turn that thinking a full 180.

If you take a trade in one direction and it works out, then you book a profit.

If you take a trade in one direction and it doesn't work out, then use that existing offside trade as a basis to make all your subsequent trades in the opposite direction.

Work one side, both sides, or aggregate positions to a profitable conclusion.

Rinse and repeat the process.

Not a stop in sight !

Oh, and before you tell me it doesn't work. I can assure you, it very much does work.

counter_violent said:

so if you now turn that thinking a full 180.

If you take a trade in one direction and it works out, then you book a profit.

If you take a trade in one direction and it doesn't work out, then use that existing offside trade as a basis to make all your subsequent trades in the opposite direction.

Work one side, both sides, or aggregate positions to a profitable conclusion.

Rinse and repeat the process.

Not a stop in sight !

Oh, and before you tell me it doesn't work. I can assure you, it very much does work.

Click to expand...

Hedging = offsetting = you closed the trade . So that will be fine .

tar said:

Hedging = offsetting = you closed the trade . So that will be fine .

Click to expand...

Good ta.

So, why is it that traders make life so difficult for themselves and worry about taking trades and where they should put stops. (basically giving money away and abdicating their responsibility to manage the outcome)

It beats me for sure !

tar said:

Wide or tight stops you are going to have losses , if you dont have losses then you are a bad trader , look at the very profitable HFT operations , they dont have many losing days in years but half their trades are losses .

Dont avoid losses per se but concentrate on winning bigger than your losses . The market doesn't differentiate between stops and TP orders its all in your imagination , so when the market drops to 10000 it could be an area filled with TP orders .

Click to expand...

Jack interviewed a bad trader in market wizards (page 156).



99% winners? 99% losers? its all the same. all that matters is the bottom line going in the right direction and the risk you put yourself at to make it so.

counter_violent said:

Good ta.

So, why is it that traders make life so difficult for themselves and worry about taking trades and where they should put stops. (basically giving money away and abdicating their responsibility to manage the outcome)

It beats me for sure !

Click to expand...

They will face the same dilemma to decide when and where they hedge/release the hedge .