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A lot of Forex traders are afraid of their brokers. And while I do recommend due diligence when choosing a Forex broker to use, I think some of the claims just don't make sense to me. The most common complaint that befuddles me is broker stop hunting.
Traders think if they place a stop loss with their broker, the broker will use this information to move price and take them out of the trade. After all, getting your stop hit is quite common. You place a trade and your stop loss... then you watch price move against you to take your stop out before moving in the original direction.
I hate when it happens to me. But I think your anger is directed toward the brokers instead of the traders really responsible. Most likely it is not the broker hunting your stops... but the big Forex traders. (After all, most of us are not trading accounts that matter in the large picture... so it is a little egotistical to think the broker cares about our small trade). Here is a more logical explanation of what is going on.
Here is an example of why stop running happens. You, the novice at home trader have identified a good level to SHORT a currency pair. You place your SHORT trade and place your stop loss above the recent swing high. And things see to go your way... until price reverses and takes you out!
Well, the professional traders also identified this area to go SHORT, but they don't weant to get in late. Therefore, they push price UP, knowing most people in the trade have their stop losses above the last swing high. Then they reverse their trade and go SHORT.
Here is what this accomplishes. They get into the SHORT trade at a much better price with much more profit potential. Since they know the market wants to go short, they can create momentum by taking out the stops of the traders already in the trade... knowing they are going to jump back in when price falls again. The big traders that move them markets now make more profit, faster.
I hope you can see that stop running is not really about just you and your broker. Professional traders use this technique to make more money. I think it is shortsighted to focus on the brokers and more accurate to focus on the big Forex traders.
This is just one example of how learning price action Forex trading can give you insight into what the big Forex traders are doing. They are, after all, the ones moving the markets. Price on your chart gives you insight into what they are doing and which way they want to trade... which you can use to your advantage.
So, stop looking at your broker as the cause of your stops being taken out. That is not going to help you make more money trading Forex. Learn to read price action and turn stop hunting by the pros to your advantage. The next time you see a perfect trade setup that reverses to take out the previous swing high or swing low... don't get mad, get into the trade when the pros do!
About the author:
To learn the stop running trade setup, go here: Price Running Setup. And if you want to learn more about price action Forex trading and how to read price, this is good: PriceActionForexTrad er.com |
