I've noticed some folks mention "broker was hunting for my stops", I can't say I've not felt that way, but always thought, to do that the broker would have to move price about 7-10 ticks away on say $NQ_f and that wouldn't just be possible, considering I'm not the only customer. Unless, I'm getting bid/ask different from other customers, which I figured would be a violation of some SEC rules. So, my question is, does it happen and if so how?.. I figured this is more a psychology question..
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In futures, no as it is decentralized and highly regulated.
In forex, it is definitely possible and will entirely depend on your choice of broker.
As for stop runs that have nothing to do with the broker (ie in futures), sure they happen as a result of how psychology works, people tend to place stops in similar places and the market tends to be drawn towards them to take them out and then continue in the original direction.
It's simply a factor of taking out the weaker hands.
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As extra to what Mike mentioned,stops are a very good way for larger traders to liquidate and/or enter without their size affecting their fills.
Stops are liquidity.Where liquidity is,facilitation of trade will be also.
I was wondering because "99% traders lose money" and yet the brokers seem to have a long existence. And most intraday strategies I've backtested (1m/3m/5m) rarely get me above 50%win rates, and brokers trade continuously at that!
So, they could use customer into and market correlation say trade large size $ZN-F (sometimes just showing large size is enough) to move bid/ask prices around and take out a 6tick stop, esp on $NQ etc .. we keep hearing NBBO getting crossed on trades.
But anyways, I'll not waste more time on this line of thinking . Thanks Mike and switchtrading
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You may want to look at the futures.io (formerly BMT) webinar of bookmap it shows some interesting examples of what seems like brokers loading/offloading to push prices around that may be evidence of just this sort of activity. Undoubtedly this behaviour occurs frequently where your broker operates their own dealing desk. Although perhaps its my optimism but brokers should be able to make money off of your success through commissions/fees, but they do need to risk manage as well. Have a search its recent one (I think).
Thanks I'll take a look. I agree if I make a bad trade whoever holds the opposite position should profit, just concerned if my bad trade is my own mistake and not because the broker knows how I trade .. Lately I've noticed that each time i trade 1 lot $NQ price jumps in the opposite direction and when it reverses back it stays couple of more ticks away from my cost price, keeping me in the red.
I saw this post from someone i follow on twitter, "mrtopstep.com/stocks-algo-effect" Stocks and the Algo Effect, sections on Predators, talks about algorithms that are trying to flush weak hands. This is what I was experiencing with my broker, turns out instead of brokers its stop hunting algos. Someone (who can) is just sitting there trying to eat up retail orders. Wish there was more detail on post. Makes me think trying to develop scalping strategies is a non starter.
yeah pretty much institutions or big players with a lot of volume to unload will test the market to see if they can move it down with a small portion of their initial equity to gain momentum or simply push price to the downside to then change directions absorbing all of the momentum filling the majority of their orders as a way to get a better price. It should affect everyone who has their stop loss in the area in question not just one person so multiple data feeds should have the same prices. If you think something is fishy I'd suggest to compare data feeds from different brokers to see if they match up.
Last edited by Itchymoku; May 18th, 2014 at 10:22 AM.