Stop Loss Hunting by Forex Brokers - What to Do?
Hello My Friends 
It is several days that whenever I find some free time, I work on an article about MACD. I think it will be a good article because I have collected all the information and systems related to MACD. I love to publish it as soon as possible. But today I have decide to spend my free time on writing an article about stop loss hunting. Before I talk about stop loss hunting I suggest you to read an article I already published about stop loss and target orders and the way they have to be set properly: Where Is the Best Place for Stop Loss and Limit Orders?
What is Stop Loss Hunting?
As you know forex brokers make money when you take a position. They charge you some pips when you buy a currency pair. This number of pips that brokers charge when you buy currency pairs is called spread. Different brokers have different spreads for different currency pairs. Spread is almost the only way that the forex brokers make money.
Good and reliable brokers are happy with the money they make through the spreads BUT there are some scam brokers who are not satisfied with this and want to make more money. Stop loss hunting is one of the ways they use to do that. They have some special robots or hire and train some employees who monitor the clients trades. When a client takes a position and sets a stop loss and the market goes against the position and becomes so close to the stop loss, the robot or the stop loss hunter employee increases the spread manually to help the market hit the stop loss sooner. For example you take a short position with EUR-USD at 1.3180 and you set your stop loss at 1.3280. You have a short position and to close this position you have to buy. So your stop loss is in fact a buy order. You pay the spread only when you buy. So you don’t pay the spread when you go short. You pay it when you want to close your short position and so you buy.
Ok! Back to our example. You have a short position at 1.3180 and your stop loss is at 1.3280. The market goes against you and goes up to 1.3275 which is only 5 pips away to trigger your stop loss. As your stop loss is a buy order so the amount of the spread has to be added to the market price and if the result is equal to your stop loss value, it will be triggered. So the market is against you and is only 5 pips away from your stop loss value but it doesn’t mean that it has to go up 5 more pips to hit your stop. If your broker charges you 2 pips for EUR-USD, this 2 pips has to be added to the market price which is 1.3275. So in fact your buy price will be 1.3277 which means it is only 3 pips away from your stop loss. If the market changes the direction and goes down at this stage, your stop loss will not be triggered but this is the opportunity that the scam brokers wait for it. As soon as the market becomes so close to your stop loss, the broker increases the spread. So while the spread is 2 pips and so the market is only 3 pips away from your stop, the broker adds at least 3 more pips to the spread to hit your stop loss. You think that you have lost your money in the market and because of the bad position you had taken, but in fact you have not lost it in a real trade. The broker has increased the spread to pretend that your stop loss is triggered but in fact it is not. The money you have lost is in the broker’s pocket.
I have experienced this myself. One day I have been watching the market through a very famous broker platform. I was checking both the live and demo account and I had one position with the demo account and one with the live account, both at the same time and price and with the same currency pair. Suddenly I saw that my position with the demo account triggered the target but the live account position was still open. When I checked, I found out that when the price became so close to the target, the spread was increased to prevent my position from hitting the target. The spread jumped from 4 to 14 in one second. It attracted my attention and I kept on monitoring the broker and I found out that they do the same thing when the price becomes so close to the stop loss. While the demo position is still open and has not triggered the stop loss, the live position becomes closed by the stop loss. So a trade that could make only $400 for the broker through charging 4 pips as the spread, made $10,000 for hitting a 100 pips stop loss. Easy money!
Why don’t they let the target to be triggered by increasing the spread?
If they let your target to be triggered, your trade will be closed and you will make a profit but if they keep your trade open, it is possible that the market goes against you and then they can hunt your stop loss.
As soon as I became 100% realized that they hunt my stops and don’t let the targets to be triggered, I enlightened all traders I knew. If you Google for it you can still find some of my posts on different forums. It also caused me to get some infractions from some forums because they work for those brokers. I think two of them even banned me and many of them deleted my post completely.
Can they succeed to hunt your stop loss or prevent your target all the time?
Not all the time. They try their chance. When the market goes to your direction strongly they can not do anything and your target will be triggered. Also when your position goes to your direction right away and doesn’t get close to your stop or when you have a wide stop loss, they can not do anything.
What should you do?
- Choose a reliable and well-know broker. Always check the reviews before you sign up. Do not be deceived by those brokers who are proud of having no dealing desk. Some of them may have no dealing desk but they do have stop loss hunter employees!
- Do not set tight stop losses and always consider the maximum spread. Click here to read the article I have written about setting the stop loss and target orders.
- Try to take the best positions at the right time.
Further Reading:
- Forex Basics:
What Is Forex and How to Make Money with It?
Is Forex a Suitable Business for Everybody?
When You Will Be A Professional Forex Trader?
Currency Pairs Explained - Understanding the Currency Pairs in Forex Trading
Currency Pairs Correlation in Forex Market: Cross Currency Pairs
How to Choose the Best Currency pairs for Forex Trading
What Thomas Edison Can Teach You about Trading Forex!
A
Letter from God to Forex Traders!
Ten
Important Forex Trading Tips
- Money Management:
Money Management is a Critical Part of Forex Trading
Risk/Reward Ratio in Forex Trading
How to Make $53,000 per Month through Forex Trading
Where Is the Best Place for Stop Loss and Limit Orders?
When Should You Get Out of a Bad Position?
- Candlesticks:
The Language of Japanese CandleSticks - The Only Real Time Indicators
Doji Candlestick - Doji Star - How to Trade Using Doji Candlestick and Bollinger Bands
What Is Heikin-Ashi and How to Trade with It?
- Price Chart:
Forex Charts - How to Use Different Types of Charts in Forex Trading
Renko Chart - How to Trade Using Renko Charts
- Technical Analysis:
How to Use Technical Analysis in Forex and Stock Trading?
How to Trade Using Trendlines, Head and Shoulders, Triangles, Double Tops and Bottoms, Flags, Pennants, Wedges...
How to Use Moving Averages in Forex Trading
How to Use Pivot Points in Forex and Stock Trading?
How to Use Bollinger Bands in Forex and Stock Trading
How to Use MACD or Moving Average Convergence / Divergence in Forex and Stock Trading
How to Trade Forex During the News Time
- Fibonacci:
How To Use Fibonacci Numbers in Forex and Stock Trading
More About Using Fibonacci in Forex Trading
How the Forex Market Reacts to Fibonacci Levels
- Tools, Indicators and Templates to Download:
Download Heikin Ashi and Smoothed Heikin Ashi Indicator and Template for MetaTrader
Have All timeframes on One Single Chart in Your MetaTrader Platform (MT4)
Great article Vahid. I see them hunting all the time. Sometimes I think a casino is more ethical
Hi James,
Yes, this is true but fortunately there are still a lot of good brokers and now traders are becoming smarter and more knowledgeable and so scam brokers don’t dare to cheat them.
Best regards,
Vahid
Hi Vahid!
Thank you very much for your help!I think your advices are the best in the web!But I have a question:
I trade GBP/USD for 3 years only with MACD 12.29.9 ,RSI and Support and resistance break (4hour charts).I want to use EMA too but I would like to know what are the best parameters concerning moving averages in a 5mn chart?
I am sorry to post here but I didn’t find your email adress.
PS: I will try your programm next month
Thank you
HENRI
Dear Henri,
Hi
Thanks for your comment.
Regarding your question, if you have been doing good with the indicators you mentioned, so why do you want to add something more to your chart? You’d better to make your system more simple.
But to answer your question, 14SMA and 20SMA are good. 20SMA is in fact the Bollinger Middle Band which is a big help. So if I wanted to use a MA, it would be 20SMA.
Best regards,
Vahid
Vahid,
I always love to read your articles. Your strength is your ability to articulate difficult issues to be easily understood by a newbie like me. That is your power indeed. Thanks a lot.
If you know, Could you list down whichever brokers are scam brokers? And also please help list down the best brokers so that all of us here can avoid subscribing to scam brokers and stick to the best one. It will be very informative if you could do so.
Those who subscribed to IBFX lost their money yesterday selling EURJPY due to hitting the stoploss at 132.03. I check FXPRO is fine and that’s why you collected a fantastic profit.
Different brokers have different data feed, and therefore will have different charts and candles. Since candlestick is the most reliable indicator of where the price will go in the future, it will create a confusion to stick to it if different brokers feed different data. What is your opinion in this case?
Could you please clarify and respond to the above questions?
Cheers and Thanks
PRIA
Hi Pria,
Thanks for your comment.
Unfortunately I am unable to give any advice about the brokers. If we add a discussion board, we will have a special forum for talking about brokers.
Yes, different brokers have different candles because of the time difference but it will not make any problem because when there is a buy/sell signal, both brokers shows the buy/sell signal but in a different way. For example when we have a Doji that shows a reversal, with the other broker we have a dark could cover which is also a reversal signal. Sometimes a broker shows a stronger signal.
I am used to see at least two charts from two different brokers with 3 hours difference. It helps.
Best regards,
Vahid
Vahid ,
I want to some few newbie questions:
1. What make different brokers have different data feed?
2. How is forex trading working across the world? where is the hub and centre of data input and output, and inflow and outflow that create a chart or a candle that all of us can see on the screen?
3. Do all the banks providing the data feeds to each broker interlink to each other?
Thanks for your clarifications
Cheers
PRIA
Pria, to answer your question…
The Forex market is what we call an Over The Counter market. There is no centre of data input or output, there are just brokers and dealers who negotiate with one another, using several different systems and channels. One of the reasons for the different data feed in fact maybe due to this - because there is no one central clearing unit.
Hi Vahid,
That is what happened to me on eur/jpy couple of days back as my stop loss was 132.03 and my stop loss was triggered at 8:53pmest on that day, and according to my broker, the price went to 132.044, just 1.4pip. i am going to open a demo account with that broker, and i will take the same trade on my demo and on my live account and i will monitor this for a month to find out. i suggest everybody does this to check out their brokers.
thanks
ateeq
Ateeq…
What is your broker? Good if you can share so that we can select the best broker in the future. Thanks
PRIA
one way to avoid SL hunting would be to hide the SL from the broker. I mean: if you want a SL at 1.3280, in your sample, then set it at 1.3310. But you do not want to loose another 30 pips, so (in MT4) give an automatic COVER (buy) signal at 1.3280. Since this order is stored on YOUR PC, not on the server of the broker, the broker does not see this, so he cannot hunt it. - The SL you give to your broker at 1.3310) only serves as an emergency exit in case the internet connection fails. - Vahid, what is your opinion about my idea ?
Hi Steve,
Thanks for your advice.
Yes, it is a good idea and that I forgot to mention in the article. It is one of the ways to avoid SL hunting. The problem is your hidden stop loss may not work if the anything happens to the internet connection.
There are some EAs that can do this on MetaTrader.
Best regards,
Vahid
Or when you enter a trade, either set a big (50pt) stop loss cushion and then move it, or else use alerts to keep you informed of the spot price. The bots tend to focus, I think, on the stop orders but many traders use alerts to tell them when to exit a trade and thus try and circumvent the stop hunting.
Vahid your knowledge and experience is always invaluable and Enlightenment, thank again for the insight.
Cheers
Jerome
Thanks to you too. I will be happy to be help.
Is it not strange how greed can make some people into shallow and disgusting creatures. I wonder if they go home proud of themselves? Is it not strange how the financial services industry; banks, brokers seems to be full of cheats and thieves? I can never cease to wonder at their venality and shallow theft. They should know; they are thieves, not clever, not smart, just thieves like the lowest petty thief there is. You will get your reward some day.
I am not sure that a “cover” or, in Oanda “limit” order is stored on your PC, perhaps the best advice is to have a “false” stop, but the danger is that the market goes against you while you are not looking.
Perhaps we need to start making a list amongst ourselves of what we think of the different brokers. I use Oanda.com and they seem OK, I have said that some strange things have happened, but I have not recognised a pattern of strange things and I am really not actually suggesting anything, perhaps I just feel bad when something “strange” costs me money! To be fair, some strange things have happened (like sudden huge jumps in the space of a minute or less) that have made me money. The EUR/JPY event, where I was stopped out, seems to be explained by the fact that Oanda had a spread of 3.6 versus a smaller spread for Vahid and co.
I must say that I have gone and checked the graphs in the practice account and the live account over different time periods and they do not differ as far as I can see so Oanda does seem OK. No I do not work for Oanda if anyone is wondering
and I have a small account so perhaps my tiny trades are not worth the time to hunt!
cheers
Stuart
Hi Stuart,
My stop loss was triggered with another broker but fortunately I traded very small with that one because I knew that their spreads are not stable and reliable.
Also stop loss hunters don’t come after you when you trade a very small. I think when you trade over 1 lot they start monitoring and manipulating your trades.
Best regards,
Vahid
Many thanks Vahid……..
I hope and pray for the day when the Forex minefield will feel the teeth of some REAL regulation, in order to rid itself of the stigma associated with these disgusting criminal offences perpertrated against honest and unsuspecting traders.
Why, if there are at least some scrupulious and honest brokers out there, do they not form themselves into a aelf-regulated association with the aim to be identified as such, and I’m quite sure the vast majority of traders would flock to their doors!
Great article Vahid,
a) we have to differentiate between the real stophunting as described by you, where brokers widen the spread or adjust manually, and
b) where “big players ” purposely go in to a pullback ( eg. at the beginning of a impulsive strong new trend ), to take out the stops of smaller players, just to resume with the trend direction.
Unfortunately, saying they do not have a dealing desk which monitors the trades, is often just a fake honesty approach. The real price of the currency is still 1-2 pips above the Interbank market price anyhow and doesnt prevent the operation of stop hunting employees.
It also depends on the amount you put in, lets say a 100K funded account which doesn`t scalp successfully, trades only during major market hours etc. will be treated differently than a 3K account going wild….
The question is really - apart from placing the right stop and target as you describe - what can we do as smaller traders to avoid getting totally paranoid and seeing enemies everywhere ?
a) choose the right broker, preferably an ECN broker that ties your platform directly to a bank liquidity feed such as Currenex, where different banks compete for the price. I dont know if giving names is inappropriate, but especially the enhancements made in Metatrader4 now
enables some honest brokers to link their MT4 platfrom to an ECN feed, just Google it, especially some European brokers from the Northern Hemisphere ( hint).
b) once you are seeing positive results in your trading, use the usual platforms only for charting, execute the trades in the Majors in a FX Futures account, which is fully regulated by the CME, the new Micro contracts are only 1/10th the size of the large contracts.
c) use Forex options for medium and longterm positions, eg on the ISE, or on a standard broker platform the World Currency Options by the Philadelphia Exchange.
Great discussions going on here, I will join your group soon, keep it up !
Good luck to everyone and listen to Vahid !
Dear Michael,
Hi
Thank you for the comment and information. I learned a lot from you.
Yes; false support/resistance breakout managed by big traders is also a problem that causes stop losses to be triggered. You made me remember that I already published an article about it:
http://www.forexoma.com/dont-let-the-interbanks-suck-your-blood-by-making-false-supportresistance-breakouts/
Best regards,
Vahid
TQ Vahid I’ve experianced this before. hehehe. stupid broker.
please recomend me a good broker - I will join u asap.
another thing… can I copy and paste using your article and put it at my blog.
TQ in advance if you dont mind.
Allah Hu.
Hello,
Thanks for your comment.
We can not recommend any broker. You can find a good one by checking the reviews over the internet.
Regarding our articles, you can link to them but you can not post the whole article or any part of it on your weblog. They are copyright protected.
Best regards,
Vahid
Humping over 3 pips when you are wrong 100 pips over the bad analysis, is not that pathetic?! Vahid writes: You think that you have lost your money in the market and because of the bad position you had taken, but in fact you have not lost it in a real trade. The broker has increased the spread to pretend that your stop loss is triggered but in fact it is not. The money you have lost is in the broker’s pocket. To my mind Vahid implies that it’s a bad fairy together with bad broker took your money and not because you were so stupid to open the trade with 100 +/-3 pips stop-loss if you are not sure in success. And in fact your are genious that opened such a great trade!
From my previous experience with the signals from Vahid’s previous site, he had such wide stops that in order to cover them in case if they were hit, you had to make at least 2 full take profits out of 3 possible. Can’t wait to see his new trading strategy stops tighter than 150-250 pips.
It is not just the matter of +/-3 pips. I have explained that they increase the spread from 4 to 14 in one second.
And who says that if market becomes so close to your 100 pips stop, you are stupid and your position is wrong??? You have chosen a 100 pips stop to give 100 pips space to the market to fluctuate and move to your target. It can move toward your target right away or goes against you for over 90 pips and then turn over and moves to your target. If you spend a little more time, you will see all of these different cases. I had positions that moved against me for over 100 pips and then returned and triggered my target. If you check the daily time frame, you will see candles with over 200 pips upper or lower shadow. Do you know what does it mean? It means your stop loss has to be over 250 pips.
Hi Vahid,
I agree with your comments about the scam brokers, there are no doubts that in an age of “raping”, “stealing” money in order to reach your targets, so you can get your bonuses (the CEO of banks, and Fx Brokers) they will have to steal as much as they can. Afyter Vahid it is a national sport, lol just look at thes banksters that claimed millions, billions, zillions of profits tyhe last 10 years, But when the sh*t hit the fan they all bankrupt, they do not only steal from their customers in order to pay obsene bonuses to the CEO, now they even have the audacity to steal the nation, the taxpayer. You dont have to look any farther than UK look at the expenses claimed by the ministers? even porno is paid for by the taxpayer. So Fx brokers are no different, you guys must realise that until recently Fx brokers were not regulated, and as no regulations, and the potential of big bucks,. it inevitably will atract gangsters to run fx brokerages. I have 5 accounts with different brokers until recently, but no doubrt in my mind, after my experience that the worst “gangsters” in the fx worls as brokers are the FXDD, the champions of invalid prices, requotes, etc etc . So there is no secret at all, they are there to make money but the greed that brought this recession/depression globally is only due to greed, so guys check carefully which broker you going with because they are there only for your money, nothing elses, and do as I did go ECN, I rather pay commission to a broker that is not chasing my SLs than to pay spread to all those “gangaters”. When you people read in their website, the words guarantee spreads, etc etc run a mile price flutuactes from interbank to interbank, if you see guarantees you can be sure you are trading against the broker your chances are minimal.Regarding Vladimir, well he probably works to one of those scam brokers . Guys check before you open an account with any of those “gangsters” .and go ECN.
Hi Vahid,
Thanks for your great article, they really give me an understanding of why have I been loosing a lot of trades from these so called NDD brokers. I have been trading live and demo account respectively. When I trade in Demo, I always perform very well and to get from $200 to $800 in a week is consider very promising. Whenever I go live with the same set of mind, I always end up on a loosing side. then I wonder why until one day I saw my target was not hit when in fact the candle did pass it at 6 pip. For E/U that should be sufficient enough but it did not and end up closing at my Stop Loss pos. That really pisses me off. So I really need your help to recommend me a broker as I do not have the luxury of testing each broker there is. I could only sign up to one broker with max of US$2k account and thats it for my saving. I want to make a living in this line and I do not intend to fail just because of the broker’s scamming. So please help me out. you can email me personally or give a link or your email for me to contact with. Thanks/
Hi Ahmad. You are probably not going to like what I am going to say, however, unfortunately we cannot recommend a broker. So far - we have not found an excellent broker with zero issues. Every broker we used, had some issues. The best thing to do is ask around (your friends and see what kind of feedback they give you - if they use brokrs). We are still searching for the right broker - we have accounts with a few of them now.
But to all those Broker goons…all the tiny trades can add up. Besides…they have machines which hunt for stops automatically.
Those Oanda folks must really hate me. I trade micros with 300 or 400 stop losses. I use the 4 week high low Dochian method.
If they hunt for my stops…they are wasting there time.
Also…try the ranging currencies…the eur/chf for intance. Use big stop losses for day trading…buy low and sell high. They hate that too. Sort of a conservative type of scalping method. Just be sure to check your trade regularly or set alerts.
If those broker thieves are going to take there gloves off…we should do the same. Just add some brass knucks to let them know you mean business!
Thanks for your advice
dear vahid …. what about with OANDA is it bonafide broker ?
There is no 100% perfect broker. Like all other brokers, Oanda also has happy and some angry clients. But in general I think it is a good broker. I have never had any demo or live account with them, but I know some people how have and they are happy.