Has anyone heard of brokers using stop-hunting software?

mrsoul

Well-known member
323 35
I have heard that some brokers use stop-hunting software. While I don't KNOW this to be the case, there have been many times that my stops have been hit, exactly, in quiet markets.

In Forex, I use one of the largest brokers.
The curencies are priced 3 decimal points out,
I.E.= 138.943 for the euro.

There are several times when my stop would be, let's say, at 138.943 and it would get hit exacty there- right down to the third decimal point and then the market would come right back.

I'm not paranoid, I know when a stop should legitimitaley be hit, but I also sometimes get the feeling that they are stop-hunting.

Has anyone heard anything about brokers using stop-hunting software?
 

Rossini

Established member
916 132
Do a test, trade for 50 trades entering your stops on the platform, then 50 trades using only mental stops. Just make sure you pull the trigger when the mental stop is hit.
 

mrsoul

Well-known member
323 35
Do a test, trade for 50 trades entering your stops on the platform, then 50 trades using only mental stops. Just make sure you pull the trigger when the mental stop is hit.
I only use mental stops now because of this and I do pull the trigger everytime.
Good suggestion.
 

SvenFoster

Well-known member
250 10
If they move a price to get "your stops" they run the risk of improving someone elses position.... unless the give you different prices to what others see.
 

nile_croc

Active member
120 21
I used to be a market maker myself (US OTC & Nasdaq) and after 2 years of trading, I can say that I ran stops maybe a total of 2-3 times the entire time. Stop running, contrary to the opinions of many traders, is not really done very much in reality. Stop running is very hard to do as a market maker, especially in very liquid markets with lots of volume. The conditions have to be nearly perfect, i.e. a very, very large stop order, little chance of receiving another order that can blow your chances of getting the market to the stop order, and then on top of everything else, you have to consider what competitors may do when they see that you're up to something.

Stop running is going to be more common in very illiquid markets, so if you're trading instruments that are sparsely traded, then don't ever give a large stop to the market maker. In very heavily traded markets such as currencies, sp500 stocks, etc, the only way your stop is going to get ran is if you have a huge, huge order.

Honestly, I don't think that any market maker for a large forex firm, etc is going to go out of his way and take all the unnecessary risk in order to stop you out of a 3 lot of EUR/USD.

The role of market makers is to execute customer orders and maintain orderly markets, not screw retail traders out of their profits. Most of the time, you don't even have time to pay attention to your stop orders until they are very close to the market. Believe me, market makers and specialists have much, much, more important things to do with their time!
 
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Chorlton

Established member
693 48
I have heard that some brokers use stop-hunting software. While I don't KNOW this to be the case, there have been many times that my stops have been hit, exactly, in quiet markets.

In Forex, I use one of the largest brokers.
The curencies are priced 3 decimal points out,
I.E.= 138.943 for the euro.

There are several times when my stop would be, let's say, at 138.943 and it would get hit exacty there- right down to the third decimal point and then the market would come right back.

I'm not paranoid, I know when a stop should legitimitaley be hit, but I also sometimes get the feeling that they are stop-hunting.

Has anyone heard anything about brokers using stop-hunting software?
Would be interesting for you to post a chart which shows where you placed your stop. One reason may simply be because your stop placement was at / or very near to a Support / Resistance level and the normal flow of the Mrkt caused the price to bounce back off this level and consequently stop you out.

Just my 2cents
 

jiggly

Well-known member
478 64
^ good response by nile croc.

you know it actually costs money to make a market move. if your broker is fudging prices in a big way then get rid of them, but if they are +/- a couple of ticks off everyone else, all the time, then you are just being paranoid, as you will experience this with whoever you trade with.

the market is just out to get you, it was after me before, it will be someone else next. dont worry everyone has their turn.
 

nile_croc

Active member
120 21
One thing traders need to realize is that running stops is a very, very risky strategy for a market maker to execute. Think about it: how do you know the order is even going to be there when you're done buying/shorting everything in sight Up/down o the level to where the stop is placed?
THE CUSTOMER CAN CANCEL THE ORDER AND DESTROY YOU!!! Market makers can lose money too!
 

N Rothschild

Legendary member
5,296 603
if your trading futures its not hard for the boys in the pit to stop run people..
 
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