Stop Hunting - Where to Place Stops

Know this fact that stop hunting takes place all times, all days and every day and there are some brokers who specialize in stop hunting for short term gains. It is amusing that some brokers preach the benefits of placing tight stops to their clients as a way to control risk, but in actual reality what they want is stop levels to shoot for.

Tight stops usually hurt as there is always noise in the markets what you call sudden random moves that easily wipe out 10 pips stops.

Now there are some ideal times for the brokers to do stop hunting, times like when the markets are thin and have high volatility and low liquidity. Rollover hours are also best for stop hunting when novice traders unsuspectingly place short term trades to take advantage of the roll over interests, only to see their trades blown out by the brokers and dealers.

Where To Place Stops?

The intra day forex market is full of noise and random moves. Price tends to jump 10-20 pips apparently for no reason at all and many traders find their stops been constantly tripped even though the market is moving in the direction that they had anticipated. Now this is what the professional traders do! They make their stop loss order invisible to their brokers by leaving them on their computers. However, this requires their trades to be constantly monitored until the preferred outcome is achieved.

Using a Trailing Stop Loss Order for short term trading is also of no use as once you place a trailing stop, you lose control of your trade and the trade may close at a random number that has nothing to do with the price action. Place the trailing stop too close and you are out too quick and place it too far and you will lose profits if the price action retraces itself quickly. With more experience you will learn that placing fixed stops often hurts more than help. What you need is dynamic stops using Moving Averages, Bollinger Bands or SARs. If you really want to risk shield your forex trades than watch these 4 FREE Forex Day Trading Risk Eraser videos by Bill Poulos.

Mr. Ahmad Hassam has done Masters from Harvard University. Watch the 4 FREE Forex Day Trading Risk Shield Videos by Bill Poulos. Get these FREE Forex Scalping Cheatsheets just now!

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