Stop hunting with the big players

It's definitely a fact that .00's are pyschological 'levels', but stop hunting is more usually done around technical stops, in my opinion at least. Rather than gunning for the stops with the big locals, I find it much less stressful to get your bids/offers in the areas beneath/above where you think these stops will trigger, particularly if there's good s/r not far away; that way you're not constantly buying the high/selling the low.
 
Anyone tried this method?
Stop Hunting With The Big Players

It would seem to me that the 1.x000 numbers like 1.5, 1.6, etc. are more psychological than the in between every 100 pips 1.xx00 numbers like 1.51, 1.52, 1.53, etc.

Any thoughts?
Well it is pretty obvious that if a stock is 91p and moving up a sell limit at 99p is probably better than 100p on the basis that everyone (except those who believe the rule!) will be trying to get out at 100p. On the other hand if it does go through the round figure there could be a bit more in it. If you need a target to make you sell then try avoiding the round figure.
Strangely I am just looking to sell Northern Foods. They keep getting to 59-59.5 and dropping back. With the market looking firm I think they might get through 60p-we shall see.
 
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Completely erroneous these days in FX to say that the big stops are more often at '00' psychological levels. In the wholesale markets that's just plain wrong. They can be there, but usually only if the level signifies something else as well.

That said, what DOES tend to gravitate to round number levels is the choice of options strikes by end user customers. I say end user because they are more likely to go for plain vanilla buy and hold a certain strike type trading. An interbank / prop / hedge fund trader is more likely to trade somewhat differently (for a start they're usually trading vol) so the strike is often the last thing to be decided (i.e. they will trade 3m atms for example, or 1w 25d Riskies or whatever). Agree a vol price, try not to get their pantaloons pulled down on the forwards / depos / rounding or whatever, THEN solve for the strikes before booking it.

But a pension fund type might typically come in and ask for 3m eurusd 1.5000 calls say. THEN you have a nice round number and when you get to expiry the bank trader prob gonna be jobbing the gamma if we're near the strike.

Make sense?

GJ
 
Completely erroneous these days in FX to say that the big stops are more often at '00' psychological levels. In the wholesale markets that's just plain wrong. They can be there, but usually only if the level signifies something else as well.

That said, what DOES tend to gravitate to round number levels is the choice of options strikes by end user customers. I say end user because they are more likely to go for plain vanilla buy and hold a certain strike type trading. An interbank / prop / hedge fund trader is more likely to trade somewhat differently (for a start they're usually trading vol) so the strike is often the last thing to be decided (i.e. they will trade 3m atms for example, or 1w 25d Riskies or whatever). Agree a vol price, try not to get their pantaloons pulled down on the forwards / depos / rounding or whatever, THEN solve for the strikes before booking it.

But a pension fund type might typically come in and ask for 3m eurusd 1.5000 calls say. THEN you have a nice round number and when you get to expiry the bank trader prob gonna be jobbing the gamma if we're near the strike.

Make sense?

GJ

Why erroneous? It's based on humans liking round numbers and putting their stops there.

Worked nicely on this one for 15pips + 30pips. On reaching 0.8, it shot up by 5 pips much quicker than the recent 30mins activity. I trailed the 2nd lot but it hit its 30TP anyway. Not bad.

audusd_stophunt.gif
 
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Maybe in FX, but in bonds the .00's still play a role. Good post though, interesting. I can actually understand it now too, having recently finished Stephen Valdez's latest offering...
 
SanMiguel are you spreadbetting, or trading futures, or what? if you're SB'ing I wouldn't advise hunting stops, period. There's just no way in hell you can see if someone is gunning for them without being in front of a ladder. IMHO, at least.
 
SanMiguel are you spreadbetting, or trading futures, or what? if you're SB'ing I wouldn't advise hunting stops, period. There's just no way in hell you can see if someone is gunning for them without being in front of a ladder. IMHO, at least.

So, you don't agree with the article? Spreadbetting, it just follows the forex market price anyway +/-1 or 2 pips. I'm not gunning for stops myself, I'm waiting for the market to gun stops at psych levels and then I just jump on board for 15-30 pips.
 
Yeah, to me the article seems like rubbish - using an SMA to determine whether locals are going to try and take out stops? On a ladder you can very clearly see if someone is going for it - for example recently in the Bund there's been one or two chappies gunning for them between 12pm and 1pm, when everyone's at lunch - you can see them spoofing the offer and using downticks in related markets to drive it down (or vice versa). But off a chart, and a moving average line, I don't see how in hell you could know whether stops were going to be triggered, or for that matter how much size you'd have to get through. Complete nonsense imo.
 
Fair enough if you're doing that, but in my experience you're better off letting everyone else do the work, bidding below the stops and aggressively adding to it if it looks like the market wants to retrace. Could be completely different in other markets to my own, but I imagine the principle's the same.
 
Trader: What the hell caused the market to move like that?!

Broker: Er, stops.

Trader: ok, thanks.

Anyone recognise that conversation? :)
 
or the sharp intake of breath followed by the collective moan as you all see bids disappearing...
 
Anyone tried this method?
Stop Hunting With The Big Players

It would seem to me that the 1.x000 numbers like 1.5, 1.6, etc. are more psychological than the in between every 100 pips 1.xx00 numbers like 1.51, 1.52, 1.53, etc.

Any thoughts?

Why don't you paper trade it and see for yourself? It's obviously not going to work all the time and the article doesn't claim it will. IMO if it does work it will only work as long as most players aren't aware of the phenomenon. As soon as the majority become aware of how predicatable their stop choices are, they'll deliberately change them and it will all become random again - until the next anomaly.
 
Why don't you paper trade it and see for yourself? It's obviously not going to work all the time and the article doesn't claim it will. IMO if it does work it will only work as long as most players aren't aware of the phenomenon. As soon as the majority become aware of how predicatable their stop choices are, they'll deliberately change them and it will all become random again - until the next anomaly.

People know already, and almost no-one puts stops around .00's any more. I only say they act as 'levels' in the Bund because people don't necessarily want to be the guy who sells a .99; that said you'd have to be a complete muppet to put a stop anywhere near a round number.
 
People know already, and almost no-one puts stops around .00's any more. I only say they act as 'levels' in the Bund because people don't necessarily want to be the guy who sells a .99; that said you'd have to be a complete muppet to put a stop anywhere near a round number.

Not so sure about that. Plenty of people would see it as a resistance point and go short or long or take profit. The market will gun for those stops to get momentum going one way or the other.
 
Well it is pretty obvious that if a stock is 91p and moving up a sell limit at 99p is probably better than 100p on the basis that everyone (except those who believe the rule!) will be trying to get out at 100p. On the other hand if it does go through the round figure there could be a bit more in it. If you need a target to make you sell then try avoiding the round figure.
Strangely I am just looking to sell Northern Foods. They keep getting to 59-59.5 and dropping back. With the market looking firm I think they might get through 60p-we shall see.
Well it's just gone 61-62 so on the non-round figure system we are looking at 64 or 69??
 
Why don't you paper trade it and see for yourself? It's obviously not going to work all the time and the article doesn't claim it will. IMO if it does work it will only work as long as most players aren't aware of the phenomenon. As soon as the majority become aware of how predicatable their stop choices are, they'll deliberately change them and it will all become random again - until the next anomaly.

It's not entirely about stops. The market will test a big psych level just to see whether price can move through it or not. So, you pick up your 15pips on that regardless. The stops are picked up by the extra 15 pip target if there are any.
 
Why erroneous? It's based on humans liking round numbers and putting their stops there.

I said erroneous because the large players just don't do that any more. Trust me on this - maybe 10% of the time that's true. Tops nowadays.

Worked nicely on this one for 15pips + 30pips. On reaching 0.8, it shot up by 5 pips much quicker than the recent 30mins activity. I trailed the 2nd lot but it hit its 30TP anyway. Not bad.

Not sure what this really proves. Bit if it makes you happy knock yourself out.....
 
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