rossored
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Stop hunting is, for example, where a support/resistance level will be traded for a period of time - say 10500 on the Dow for example. Then, along comes a major player with some buying power, and puts in a huge bid at, say, 10495. The market starts to sell off (because everyone can see the huge bid at 10495), and triggers a load of stops set just below the "support" level of 10500. As the stops as triggered, the buyer pulls his bid, snaps up all the contracts that have just been triggered, and takes a massive long position. So, the market now turns, rallies, and leaves all the little players thinking "son-of-a-b***h" as the price now goes in the direction they originally thought it was going to go in.
The term is also sometimes used against SB companies, in that they also know where common stop levels are, so when the price gets to that level (or thereabouts) they don't have to push it that much more to trigger a bunch of stops. Whether or not this actually happens depends on who you speak to.
The term is also sometimes used against SB companies, in that they also know where common stop levels are, so when the price gets to that level (or thereabouts) they don't have to push it that much more to trigger a bunch of stops. Whether or not this actually happens depends on who you speak to.
peterpr
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rossored said:
When you have been on the receiving end of it you don't need to canvass opinion on whether or not it happens; you KNOW it does.
The same applies to price/quote spikes - mainly out of hours/thin trading times. They know what the order volume/levels are. If a stop can be taken out without triggering too many/any 'outside the box' trades and therefore a hedging problem - well, it's just another way of widening the spread isn't it?. I'm not saying it's a routine occurence, although frankly I suspect it is, but if a practice is possible, profitable and doesn't increase risk (reputational, regulatory or financial) then it is simply bound to go on. It would be a doddle to install systems to automate the practice even :!:
Unless you are trading on a regulated exchange, you risk being traded against by your quote provider. - simple as that.
Not complaining you understand. I simply put it down to 'educational costs'. And of course direct access brokers are not without their own little foibles either.
"Stop hunting is, for example, where a support/resistance level will be traded for a period of time - say 10500 on the Dow for example. Then, along comes a major player with some buying power, and puts in a huge bid at, say, 10495. The market starts to sell off (because everyone can see the huge bid at 10495), and triggers a load of stops set just below the "support" level of 10500".
Why does a huge bid below a support level trigger selling?
Rob
Why does a huge bid below a support level trigger selling?
Rob
SOCRATES
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Yes, of course. It is obvious that a huge bid filled will facilitate trade on the basis that liquidity is maintained and provision made for order flow. Big orders do not get filled in illiquid markets.ZDO said:
That is why they are illiquid, and the corollary is that if they are illiquid, then there is no order flow either. Obvious. You cannot complain I do not tell you everything.
KInd Regards As Usual.
"Stop hunting is, for example, where a support/resistance level will be traded for a period of time - say 10500 on the Dow for example. Then, along comes a major player with some buying power, and puts in a huge bid at, say, 10495. The market starts to sell off (because everyone can see the huge bid at 10495), and triggers a load of stops set just below the "support" level of 10500."
Sorry to come back to this again, but would it apply to American shares? I would have thought that if a huge bid suddenly appeared on a level 2 screen, especially if it were close to the best bid, traders might consider that there would be increased demand for the shares and might be tempted to buy (unless they thought it was a deliberate attempt to mislead them).
I can understand that if the bid were filled quickly that might be taken to imply that lots of shares were available and might stimulate selling but I don't understand why the simple presence of a huge bid should stimulate a sell off.
Rob
Sorry to come back to this again, but would it apply to American shares? I would have thought that if a huge bid suddenly appeared on a level 2 screen, especially if it were close to the best bid, traders might consider that there would be increased demand for the shares and might be tempted to buy (unless they thought it was a deliberate attempt to mislead them).
I can understand that if the bid were filled quickly that might be taken to imply that lots of shares were available and might stimulate selling but I don't understand why the simple presence of a huge bid should stimulate a sell off.
Rob
re "the simple presence of a huge bid should stimulate a sell off."
Presence of a huge bid will not necessarily stimulate a sell off. It may (along with other 'dominant concerns' etc) gently attract the auction that way toward the huge bid... the huge bid may have little or no impact at all
Presence of a huge bid will not necessarily stimulate a sell off. It may (along with other 'dominant concerns' etc) gently attract the auction that way toward the huge bid... the huge bid may have little or no impact at all
soccer_daemon
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So what is the advice from the gurus out there for not falling into the stop
hunting trap ? Usually we the little guys don't know how far the hunt could go, do
I really want to set the stop further away from the S/R ?
It just seems in forex if you don't set the stop to be far enough to hurt you when
a real break-out happens, you risk a very good chance of the stop be triggered
during the hunt.
I am just thinking that mid point between the near end S/R and the next S/R
away should be a reasonable spot since if that gets triggered it stands a better
chance of that being a real break-out and if so, you want to be out if you were in
the wrong direction to begin with. However, that may mean a larger than
desired stop for me ....
hunting trap ? Usually we the little guys don't know how far the hunt could go, do
I really want to set the stop further away from the S/R ?
It just seems in forex if you don't set the stop to be far enough to hurt you when
a real break-out happens, you risk a very good chance of the stop be triggered
during the hunt.
I am just thinking that mid point between the near end S/R and the next S/R
away should be a reasonable spot since if that gets triggered it stands a better
chance of that being a real break-out and if so, you want to be out if you were in
the wrong direction to begin with. However, that may mean a larger than
desired stop for me ....
Mr. Charts
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robq has asked an interesting question which has gone unanswered so far.
There was a stock this afternoon I was about to go long on when the "large size on the bid" scenario suddenly appeared. I hit screen dump as I thought it would be a useful image for coaching reasons.
I've cropped the image and erased the stock name.
Would anybody care to say what happened next and why?
Richard
There was a stock this afternoon I was about to go long on when the "large size on the bid" scenario suddenly appeared. I hit screen dump as I thought it would be a useful image for coaching reasons.
I've cropped the image and erased the stock name.
Would anybody care to say what happened next and why?
Richard
Attachments
frugi
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Hi Richard,
I just edited the attachment as you'd left the ticker symbol in the eSignal box.
I haven't cheated, but I'm going to look at the chart when I've posted & see how wrong I am ... I cannot understand L2.
My instinct is to say, well, 32.75 will become a support level as the size bidder soaks up any weak hands' selling, probably selling from those who do not have a L2 view. Once he has finished soaking it up, accumulating it, then the price can be allowed to rise significantly.
But if you wanted to buy that much stock, genuinely, why would you advertise this intention so obviously? Anyone with L2 will see the bid and think, "Oh good a huge support level provided by a big player who is wanting to buy size because he thinks it is going up." So nobody sensible would sell any of their stock to him, well assuming they had L2 and they thought he was genuine, no in fact they'll probably all start buying, following the smart bidder, thus denying our big player a lot of the stock he wanted at 32.75.
So he should pull his bid for a minute or two and watch what happens. Does the stock drop just a level or two or does it cause a rush of selling? He pulls his bid to test supply below the support level he's just created. If there isn't much supply then he can start buying in earnest, as all the weak hands have been washed out and the price must now go up. If there is, and the stock drops several levels then he may rethink his strategy and try and buy lower than the 32.75 that originally looked attractive.
Level 2 confuses me because there seem to be so many interpretations of a given snapshot. Maybe that big bidder is actually a seller pretending to be a buyer. While he sits there 348 bid he's offering out lots of 10, 50 and 75 simultaneously through ISLD, his big bid stopping the price from falling while he distributes. Maybe he's a genuine buyer, maybe he's just faking a bid to test the water, to see what happens ... it's too much for my small brain anyway.
I just edited the attachment as you'd left the ticker symbol in the eSignal box.
I haven't cheated, but I'm going to look at the chart when I've posted & see how wrong I am ... I cannot understand L2.
My instinct is to say, well, 32.75 will become a support level as the size bidder soaks up any weak hands' selling, probably selling from those who do not have a L2 view. Once he has finished soaking it up, accumulating it, then the price can be allowed to rise significantly.
But if you wanted to buy that much stock, genuinely, why would you advertise this intention so obviously? Anyone with L2 will see the bid and think, "Oh good a huge support level provided by a big player who is wanting to buy size because he thinks it is going up." So nobody sensible would sell any of their stock to him, well assuming they had L2 and they thought he was genuine, no in fact they'll probably all start buying, following the smart bidder, thus denying our big player a lot of the stock he wanted at 32.75.
So he should pull his bid for a minute or two and watch what happens. Does the stock drop just a level or two or does it cause a rush of selling? He pulls his bid to test supply below the support level he's just created. If there isn't much supply then he can start buying in earnest, as all the weak hands have been washed out and the price must now go up. If there is, and the stock drops several levels then he may rethink his strategy and try and buy lower than the 32.75 that originally looked attractive.
Level 2 confuses me because there seem to be so many interpretations of a given snapshot. Maybe that big bidder is actually a seller pretending to be a buyer. While he sits there 348 bid he's offering out lots of 10, 50 and 75 simultaneously through ISLD, his big bid stopping the price from falling while he distributes. Maybe he's a genuine buyer, maybe he's just faking a bid to test the water, to see what happens ... it's too much for my small brain anyway.
peto
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From the way you have posed the question the answer that it tanked thereafter would seem obvious! However the reasoning is less obvious, and I like robq would be interested to know why. I've also noticed a tendancy to 'trade towards volume' in index futures markets.
I suppose a big player placing a large bid just below support would soak up all the sell-stops that are triggered as price falls through support (encouraged by same big player?). Selling out of the way now he is nicely loaded with longs for the next leg up??
pete
oops post crossed with Frugi, whose answer is way deeper than mine, and scary enough to make me think I need to avoid level2 forever!
I suppose a big player placing a large bid just below support would soak up all the sell-stops that are triggered as price falls through support (encouraged by same big player?). Selling out of the way now he is nicely loaded with longs for the next leg up??
pete
oops post crossed with Frugi, whose answer is way deeper than mine, and scary enough to make me think I need to avoid level2 forever!
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At 14.52 you get a big un-named bid during a pretty illiquid time. The sellers just aren't there at the moment, so it is probably a ploy.
The alleged buyer is trying to act like Big Money and encourage others to join the game by buying at market. As you were thinking of buying yourself, there was also some sort of set-up, which would add to the deception.
But...
Our mystery buyer was probably a seller in disguise. Just waiting for the buy orders to come in at market to absorb them, then the price falls.
Am I right, am I am I, Huh?
The alleged buyer is trying to act like Big Money and encourage others to join the game by buying at market. As you were thinking of buying yourself, there was also some sort of set-up, which would add to the deception.
But...
Our mystery buyer was probably a seller in disguise. Just waiting for the buy orders to come in at market to absorb them, then the price falls.
Am I right, am I am I, Huh?
