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The market doesn't know anyone, markets are always breaking their own patterns so there will be a coincidental clash with your position inevitably. You'll have a better chance if you're able to call a pattern change before it's done, at least a 60%-70% of the movement. Not an easy task but it's the path. If you stick to a fixed model for a long time, eventually you'll go through often rough times.
I assume that instos and funds compete against each other (rather than collude against retail traders). If they didn't compete, then the swings would be enormous, and they're not. So I think we can assume competition will always be part of the market which means there will always be a place for retail traders to make a quid. We just have to figure out what the 'Composite Man' is doing, and move with him.
The market does not know where 'your' position is. Exceptions may be had for very large traders that hold longer term positions- but think in the thousands of lots- not hundreds. This exception is pretty much for the largest traders that hold/pin the market in certain price ranges. Competing firms may attempt to squeeze them.
It knows where the liquidity lays, the depth of liquidity at each level (both these are assuming everything remains status quo and orders at a level are firm and not meandering or spoofed).
It knows historical interest at every tested price, and it knows- based on the most common time frames- where a significant amount of liquidity may trigger due to a massing of safety stops.
It also knows, at untested prices- a probability of support or resistance- given common widely used technical analysis techniques.
So if you trade with a heard mentality that does not deviate from what almost everyone else is doing, then yes- it might seem like the market knows where your position might be... But technically- that's just because you are not unique to what the masses are doing. Everyone (hopefully) is looking at the same information.
The following 5 users say Thank You to DanDaMan for this post:
I always thought that the market was chasing my stop levels. To avoid that I'm trading spreads between Nasdaq / Russell, I feel more protected and only their difference are important for me!
The following user says Thank You to JPStructure for this post:
Let's say that the institutions want to do a large sell order. Let's say that you are correct, and you also want to sell. You put your stop loss in an expected area, one that everyone expects, one that everyone uses, under some well known commonly traded system. The institutional traders think there is likely a lot of stop loss orders around those expected levels. The stop loss orders are buy orders. The institutions are selling so they need buy orders in order to fill the other side of their trade. They need lots of liquidity in order to fill their positions. Maybe somehow, they are able to manipulate price a little into that area, and set off the stop losses so that their sell order can be filled. That's the idea behind stop loss hunting. However, thinking that they are after some small time trader's stop loss is ridiculous. They have no idea about you, what you do, nor do they care. You could make 10 million dollars in one day, and they still wouldn't have any clue who you are. You could then cash out your 10 million and put it in assets that can't be tracked like rare gold coins, and put them in a safe deposit box. If you invest a billion in known stocks, that can be easily tracked, and you will end up in the Forbes 500 automatically, and have a bunch of idiots calling your house. I feel that most people who want to trade use the idea of stop loss hunting as an excuse, and they begin to believe that because of it, they can never be successful trading. That creates a self fulfilling prophecy, and they get what they believe. Traders can be successful in whatever they want to trade regardless of whatever the institutions are doing. The high speed algorithms also should have no impact on your trading, if you start to trade a strategy that works. Most likely, it will be a strategy that you created and tested, through practice and experience. Most likely, it will happen after many years of hard work and not giving up.
The following 3 users say Thank You to brmicha2000 for this post:
