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Stop Hunting - Fact or Fiction?
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Stop Hunting - Fact or Fiction?

  #21 (permalink)
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mastercraft29 View Post
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Ironically, soon after my last post there was a great example of my point in the EURUSD.

See image. Some traders might call these two arrows "stop runs". If this is the case, why did prices not breakout strongly below the low or above the high? Because this is a trading range, where institutions buy low sell high, scalp, use a wide stop and scale in when prices do not immediately go in their favor.

In example 1, prices broke out below the previous low but immediately reversed up. Some might think this is a stop run. But there is a problem. The bulls had already taken profits at the new high (small sideways TR, micro wedge and FF reversal). Most bulls were not willing to buy high in the trading range, and those who did used a wide stop like a measured move down and scaled in at the new low. This breif time of a one sided market led to a sell vacuum as the bulls stepped aside. Once at a new low, bulls who were flat bought the new low and bears bought to take profits, which led to the large tail and new high.

In example 2, bears had taken profits on 1 or used a wide stop and scaled in at the new high. Bulls who had bought 1, took profits at the new high, resulting in another failed breakout and reversal.
So my point is this; these are not stop runs because they already took profits.

If there were more stops at this location, prices would sell off strongly below the new low, or breakout strongly above the new high. If you are placing your stops in these locations, your stop location is the problem. Not the market "out to get you", or "running your stops"

Josh

I don't see why on your chart those levels corresponding to the arrows would be levels where 'stops'
are setting, in either of the two directions.

As those are not levels for stops, they can also not be stop runs.

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  #22 (permalink)
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I can't remember whether anyone has already commented about this but I think "stop hunting", if and when it does take place, is of no concern to the retail trader.

Nobody who has the capital and the bandwidth to go on a stop run is interested in the 1, 2, 10 or even the 20 lot trades.

Always a battle between institutional actors, hedge funds and what not.

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  #23 (permalink)
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xplorer View Post
I can't remember whether anyone has already commented about this but I think "stop hunting", if and when it does take place, is of no concern to the retail trader.

Nobody who has the capital and the bandwidth to go on a stop run is interested in the 1, 2, 10 or even the 20 lot trades.

Always a battle between institutional actors, hedge funds and what not.



Couldnt agree more. As a trader, our job is to follow the institutions!


@rleplae - the stop location would be beyond the swing point, which is the point i am making that traders are miss reading the price action and should not place a stop at this level (when in a trading range). However most new traders do not know this and consider this a "swing stop" and then wonder why they were stopped out, and assume it is a "stop run."

But you now have me baffled. Where would you consider a stop run as taking place if my example is not one in your eyes? If you dont consider a swing point as a place to put a stop and therefore an example of a "stop run" then you must consider ANY move and ANY price on a chart to be a stop run!

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  #24 (permalink)
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mastercraft29 View Post
Couldnt agree more. As a trader, our job is to follow the institutions!


@rleplae - the stop location would be beyond the swing point, which is the point i am making that traders are miss reading the price action and should not place a stop at this level (when in a trading range). However most new traders do not know this and consider this a "swing stop" and then wonder why they were stopped out, and assume it is a "stop run."

But you now have me baffled. Where would you consider a stop run as taking place if my example is not one in your eyes? If you dont consider a swing point as a place to put a stop and therefore an example of a "stop run" then you must consider ANY move and ANY price on a chart to be a stop run!


My trades on 6E are on the chart : (I was long)
my stops were behind the low of day.

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  #25 (permalink)
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xplorer View Post
Nobody who has the capital and the bandwidth to go on a stop run is interested in the 1, 2, 10 or even the 20 lot trades.

Absolutely true.

With an average number of

ES: ~3.x
NQ: ~1.x
FDAX: ~1.x
etc.

contracts per trade during the main hours at the moment, most "stop runs" are simply
plain retail dabbler tinfoil hat theories.

Just an ES snapshot for today (other days aren't better at the moment):

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Or for the NQ which definitely had a tinfoil hat stop run today:

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  #26 (permalink)
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I don't believe the charts shown here can really be used as examples because they don't show you the order flow. If we come up to a level and go through it only to immediately swing back the other way, you simply cannot make any assumptions about why that happened without seeing the order flow. It could be that liquidity simply pulled out of the way. It may have been that trading above that level generated new interest. When it stopped it may have been an iceberg order, new sellers coming out of nowhere, or simply a lack of interest at the higher price.

The only way I know it's a stop is by watching the orders come in live. The price goes up two ticks all at once, and eats up all of the liquidity before anyone can pull. Things can only happen this fast if it's being triggered by resting stop orders on the exchange. Even then it's impossible to know for sure in some instances.

So let's watch some examples from yesterday that I believe to be "stop runs". First lets set the stage though. Yesterday was a trend up day. We traded up a point and a half as we filled in the rollover gap.

As we approach the high of the day you can see iceberg orders absorbing the market sell orders at 09. This is often a great setup for a stop run that will take us to new highs on a trend day. In such a level break setup they'll hit 10 with market orders, and then get out at 11/12 with limit sell orders. However, that's not what happened. Instead they clear 8 with two large market orders, and then hit 07. At this point you see all the stops trigger taking us to 05.
This is larger players goading people into positions. They pushed it up to where it was specifically so that people would put stop orders at 07/06.

Start at 1:28:30


Why did this happen? We're having a big up day, and we know that eventually we end up almost a point higher. Why is there a stop run down? Look at the cumulative delta. For a while we were skimming the daily lows in cumulative delta despite being near the highs. The setup happened only after cumulative delta starting coming back up again. In other words short sellers had already exited, and there were more longs than there were shorts. The risk reward ratio for this guy favors pushing it down because there's more people to stop out that direction. The level break player could have gotten 2 or so ticks out of breaking it to the highs, but instead he got 4 ticks slamming it down. The trader probably made 500 contracts * 4 ticks * $31.25 = $62,500 in profit.

It's not until the market has gone sufficiently short that they decide to pull the level break to the upside which is the start of a move that eventually takes us up well over 16 ticks.

Start at 1:59:02


Long story short they stopped out a bunch of longs only to take another measured move higher. Stop hunting is totally a thing.


Last edited by TWDsje; September 6th, 2017 at 05:10 PM.
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  #27 (permalink)
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TWDsje View Post
The trader probably made 500 contracts * 4 ticks * $31.25 = $62,500 in profit.

If you take a look at today's ZB numbers you can easily see that the assumption that anyone would get
a 500 contracts fill at CME/Globex at the moment is pure nonsense.

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  #28 (permalink)
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Here is what I think.

Unless you have worked with very large funds then you are simply speculating (as I am with the following post). Saying that institutions don’t care about small orders is only 50% true. They don’t care about individual speculators holding 1-20 contracts, but they DO care when there are one hundred+ speculators holding 1-20 contracts each.

I am going to imagine that my client wants me to buy 10,000+ contracts on CL somewhere in the range of 46-47 or better. I cannot simply buy everything at once. For obvious reasons
So what do I do?

I have to create liquidity by enticing as many short players into the market as possible so that when I start getting into my long position, no one is going to notice that a big player has just entered. I wait for the right time by gently buying to the market at my price range and as more and more liquidity enters(shorts), I soak it all up by scattering resting orders and also gently hitting into price. Just enough so that no one is alerted to my presence just yet.

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When the time is right I enter a big chunk of orders, clearing out offers and letting my intention be known.

I know my huge order of 10,000+ is more than likely going to reverse direction and speculator sentiment because:
a. Everyone would have noticed my buying which would look like an iceberg to the order flow enthusiasts.
b. Chartists will notice a pinbar rejection and some will reverse positions into a long (this helps me) and others will hold their shorts until they eventually puke (which helps me later).
c. Wyckoff speculators and a few alert players would have seen the obvious signs preceding the move up.
d. I would be going with the larger trend.
e. All those short that Ive just steamrolled have realised they are stuck in the cross-hairs of a heavy artillery bombardment armed with nothing but a twig.

I do believe that stop hunting is a strategy employed by larger institutions, and a very effective and necessary one at that!

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Last edited by Grantx; September 7th, 2017 at 05:55 AM.
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  #29 (permalink)
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Same numbers for the CL:

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I.e.: In order to get 10000 contracts via CME/Globex, one would have an average expectation of
more than 5000 partial fills / trades at the moment during the main hours.

a) What kind of hunting would that be? Slicing a rabbit by 5000 cuts?
b) Why do you think are the average trades so small?
c) Why do you think block trades and CME Clearport exist that you don't even see in your order flow when trades are closed?

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  #30 (permalink)
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choke35 View Post
Same numbers for the CL:

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I.e.: In order to get 10000 contracts via CME/Globex, one would have an average expectation of
more than 5000 partial fills / trades at the moment during the main hours.

a) What kind of hunting would that be? Slicing a rabbit by 5000 cuts?
b) Why do you think are the average trades so small?
c) Why do you think block trades and CME Clearport exist that you don't even see in your order flow when trades are closed?

I dont know what your attachment means, can you explain?
At 10:41:18 it say volume/sec = 69. Does this mean 69 contracts swapping hands every second with the average trade size being 2? 69 contracts every second adds up quick (am I mis interpreting the data).


a) I dont know. Why would big corporations pay millions for quants and scripts to scalp thousands of trades every minute of the day if the didnt care about the small stuff?
b) I really dont know. Can you explain?
c) Yeah I forgot about that. Good point.

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