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Forex Trading - Stop Hunting - What To Do About It

 


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Let's just come right out and say it. Do brokers hunt stops? Yes!

Okay, we got that cleared up. Let's clear another thing up, too. Every time someone whines about stop hunting, is it a foregone conclusion that it has happened?

No!

In reality most forex traders are under-capitalized. This forces them to trade with too tight of stops to protect their already too small capital. Unfortunately, with a stop that tight, the broker doesn't even really have to do anything. The market can just hiccup and you'll be taken out of the trade.

(Other times, brokers will “cause" the hiccup, causing you to be taken out of the trade. )

It seems that traders have forgotten the most basic principle about stops. They should be placed where you think the market won't go!

Don't put them in the path of the market. Put them where they are hard to get at. Then if the market does find them, you know with certainty that the trade wouldn't work (you gave it plenty of opportunity).

The problem happens right here. Most traders can't afford to use wider stops. They can't afford to put them where the market most likely won't go. Now what?

Simple. If you're trading full lots, drop down to minis. If you're trading multiple lots, trade fewer lots. If you still can't afford wider stops, trade micro lots.

If you can't afford micro lots, get some more money!

You can stop the broker (and the market itself) from hunting your stops if you make them hard to reach. Your broker isn't going to make a 50 pip spike to take out your stop (in normal market conditions). That's too obvious. They know you'd smell a rat for sure.

Do you want to learn more about how I trade? I have just completed my brand new guide, “Forex Trading - What Finally Worked For Me".

Download it free here: Forex Trading

Nathan Pennington is a forex trader and the author of Winning Forex Trading -THE Definitive Guide

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