Article Do Brokers Really Care About You?

[T2W Bot]

In this article I will examine more closely the common belief that those darn Forex brokers are “running” or “hunting” our stop loss orders. First, let’s define what this means. Running or hunting stops basically means that you enter a long (short) position with a sell (buy)stop loss a few pips below (above) your entry. The price action then comes to your stop order, takes you out, then the price action immediately reverses direction – often going directly to your first price target! Has anyone had this happen to them before? Do a quick internet search and you will find tens of thousands of references to this.
There are two main problems with this belief. The first is the psychology involved with this belief. Do you REALLY believe that the Forex broker is going after YOUR order? Is your position so important to the Forex broker’s profit and loss that they will run the market up or down to take you out so they can book the spread on one more trade today? In every class I teach, this...

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[nunrgguy]

And the fact that everyone knows where stops are just outside support and resistance zones is another reason not to put them there. If you're going to play it that way it's much better to have an even wider stop (say 3ATR) which is a disaster stop only and having your 'get out line' where you suggest having the stop. You only close the trade if price actually closes beyond your line, not price merely touching it.

 

[spikee36]

And, Spread Betting companies are even worse

 

[alan5616]

Half the picture

The author seems to have never heard of "Virtual Dealer", produced by Boston Technologies. This is a plug in, for brokers using the MT4 platform, and can be programmed to trade against the client. The program options include slippage, requotes and terminal disconnects at appropriate times.

 

[advfntrader]

surely this is against FSA regulations to use the program like that ?

 

[pboyles]

surely this is against FSA regulations to use the program like that ?

They'd have to catch them first and in any case a lot of brokers are offshore. Gain Capital aka forex.com were caught and heavily fined though not to the extent that it would deter others. I doubt the virtual dealer plugin is the only piece of software out there.