Stop Hunting

[dah7]

Is the practice of stop hunting amongst FX Brokers as prevalent as we hear. Does anyone know of a broker who doesn't engage, or at least engages to a lesser extent, in this activity? Does anyone have any experience with Oanda?

[novice]

Perhaps stop hunting is a reason to seperate your broker (who knows your stops) and your market maker?

[currencia]

"seperate broker and marketmaker" ????

what U mean by this Novice?

The terms broker and marketmaker seem to get used interchangeably in trying to explain a retail forex trade box. Actually, the situation of the trade box operator is rather hermaphroditic when it comes to whether they are a broker or a marketmaker.

Rest assured when markets get slow and the trade box operator has a desk twiddling their fumbs and ringing up overhead, the desk is going to be trading for their own account, market and stoploss orders posted permitting. This way, payroll can be subsidized or met in full from this cherry picking that lay before their eyes. Some admit doing it; others say "oh,not me".

Little do many traders grasp, but the trade box operator contributes to prices on the chart feeds that run your charts. Most traders mistakenly think this chart data comes from some independent holifier who breathes audited fairness and equity when in fact the candles can go this way and the candles can go that way, when in fact nobody was tradin but the trade box operator as he filled his trades from your stops.

Of course, when the 5 pip scalper sees the atrificial candle blip being generated, he thinks "time to trade", so he executes a trade, giving the box operator some business when otherwise it was slow; part of which the trade box operator again will trade for their own account when the client trades kitty whamphus to the market. Remember, data to you is DELAYED! And so, we end uo with the saying "tradin noise"!!

When "real" volume comes around, the trade box operator stops this activity because the desk is now too busy filling orders and laying off the risk; there is no time for fumb twiddlin and the desk's wages are presumably being met.

Still want to be a few pip scalper?

How does your perceived mechanics of marketmaker vs broker eliminate this Novice?

[gfxtrader]

Hi currencia,


well, that is so true, I heard this from a friend working in a brokerage house. I've also found some market maker tricks, I use two of them on two of my live accounts, and found price differences from 5 to 15 points in low volatile conditions.

All scalpers should read your post. This is why I do not usually scalp.

[novice]

Well maybe Australia is different to America.

Phone brokerage not a retail trade box.

You have two seperate companies.

One a broker.

The other a dealer (market maker).

The broker is your go between you and the market maker. They execute your orders with the market maker (whether they be stop, limit or market). But they charge an actual commision for their services.

The market maker (usually a major bank) quotes a bid and an ask. When the price is right your broker executes your orders. The market market does not know what your orders are only your broker does.

The market makers bid and ask reflect the interbank market as opposed to stop hunting.

[MickMason]

Originally posted by dah7
Is the practice of stop hunting amongst FX Brokers as prevalent as we hear.

In a word, no!

There are lots of broker scare stories that do the rounds, stop hunting is one of them. Some losing traders need to find excuses for their losses in order to preserve their opinion of themselves and their trading ability. Precious egos don't belong in this game.

If you're concerned about your broker trying to shaft you for a few bucks then the remedy is simple, use mental stops.

Look at it logistically. For a broker to hunt your stop means he has to move prices on the platform way off market. The risks for him doing that are unrealistic, some traders run interbank price feeds and could take advantage, what he gains from your stop he risks losing to another trader taking advantage of a 'good price', it's a lot of effort and risk for very little return, if any. Also, moving price to trigger your stop can also mean it triggers limits, again what he gains from your stop he risks losing on filling a limit order, it wouldn't make sense to use such tactics.

Mainstream brokers have in the region of 40 or 50,000 live accounts, they don't have the time nor inclination to use such blatant tactics to steal your money, they simply don't need to, most traders give their money away without much of a fight anyway.



Mick

[currencia]

Ah, I have learned long ago that one can not deter the undercapitalized, slightly informed newbie from the seemingly pre-ordained journey to "scalp that noise" as if they are mesmerized and the pips magnetized in such magnitude that only severe calamity shall undo the bond to destiny. When the forces of nature part them from their pips, the journey upon replay most often simply repeats itself. A six month cycle it appears.

Nevertheless, perhaps it shall save one scalper of 7,665.

[novice]

btw I am not a scalper or even a day trader