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Absolutely correct. Market makers know where people's stops are - most people put them at the swing low and they know that. Also, when you see the market going up and see clusters of sell orders below the current market price, there's where people's stops are. Bingo! This is liquidity, and the algos are trained to go towards that liquidity. That 's why you'll see the market reverse if those orders are canceled before price gets there - the algos go "oops, where's the liquidity?" You have to pay attention to the DOM/LOB to see where concentrations of resting orders are to figure out what's going on.
I have a friend who trades without stops for that very reason. Maybe a better strategy would be to front-run the stop hunt by placing your buy order a few ticks above those large resting orders.
When price gets too far above or below value, it will tend to swing back into the value area. Price oscillating around POC isn't unusual at all.
In essence, your analysis is spot on. An institutional trader, maybe?
Like so many aspects of trading, the very best setups often go awry. No indicators identify where the orders actually are, prompting buying or selling. Only 3-5% of Retail (small) day traders- futures, options, stocks/etfs- make many, so knowing that reinforces something I've learned the hard way for 11 year: 95-97% of all retail/small traders lose money. Our indicators just don't identify where the orders are to refute, or reinforce, the best setups, like an inverse H&S. If anyone in futures.io world feels there is a way for 'us little guys' to trade and make $50k a year, or more. I would greatly appreciate the opportunity to eat humble pie and learn any techniques, indies or templates that actually work. Your analysis is what I have noticed over 11 years: nothing works consistently enough to make even a very modest income. Please, any successful traders out there, if you have any method that works- consistently- even if it is just scalping at high percentage wins- share this with us. I'd love to try trading futures again, but I have not found a 'winning formula/method'. Thank you. Scottiep
Thank you for your very fun writing, but nevertheless for a naturally serious subject. Indeed, on some days, it seems that the market is quite a fool and makes some special stuff that really has nothing to do with any of the methods you have already learned. Try to look at where the big boys are going and try to move different levels of support and draw trend lines, but nevertheless or maybe that's why everything goes exactly the same day. The only thing you can try to do is follow just what the market is telling you at a given moment, everything else is just an enlightened guess about what might happen next. Of course, you can improve your success rates by using different casting based analyzes, but, despite all the great tools, it is ultimately only about what the market is doing and you can't be right every time.
The only way to uiderstand the situation is to put yourself in their shoes. If the only way you are going to make money is by your clients losing money then you've got to be wicked. Your boker can see exactly where everyone's stops are. If YOU were the broker what would you do? You see 2,000 stops on long positions and price is rising. You'd flash drop the price to stop 2,000 accounts out, then as price is rising again a flash buy is inititated one penny above your collective stops and the broker receives the profit from the buy point and the point where the flash up again ends. Sweet huh?
This guy understands. There is no "they". The Market Makers aren't out to get you. Institutions don't care about you. HFT algos aren't hunting your 1 lot, and the DOM lies. They aren't going to deploy hundreds of millions of dollars to drive the price down to grab retail orders at a pivot to get a "cheaper price". You are completely immaterial to them. Also, Santa and the tooth fairy don't exist. The reason they don't care is because all of the retail volume added together doesn't effect what they're trying to do in the least. Does an elephant care about a fly? Stop reading too much into it. You're simply looking at price under a microscope and your stop was hit by the normal noise in the market.
I haven't read all of the replies here, but what I read was good.
Consider this: what if you were able to enter after one of these stop hunts, liquidity sweeps, etc.? What would the Risk/Reward profile look like? IMHO, these stop hunt events signals a big tell in the marketplace where a direction was attempted and then failed. You can build an entire business around identifying these events and then trading after they happen.
Sorry, but this is not reality. Brokers serve to broker transactions. They don't care what happens. They want you to live as long as possible to make as many transactions as possible.
well yes and no. 80% plus of the trading volume are blots. may be more. are they hunting your one or two lot stop losses . not likely. i used to think so after i got mine clipped like you did. the stops that are being hunted are the ones of swing traders and hedge funds . those stops are bigger and will mover the market a larger distance when triggered. and example when the market brakes the 50 or 200 moving averages with volume you see a big and sudden move down . some bigger players are selling there. on a daily chart .
Most retail traders keep stops to protect against loss. These stop info is shared with big traders by most brokers as paid service. So if a trader has a large buy order then it makes sense that these be filled at lower price by all the sell stops. There is no guess work. The stops are there on their screens.
It is easy money and that is the motivation....not to cheat small traders ..they are collateral damage.
It is easy for a big trader to take money from small trader than to fight with equally big trader.
As small lot traders we need to know where we are in the food chain. Hint: It is not at the top...but more often at the bottom.We are the small fishes that feed of the left overs from the kill of the shark...sometimes we are food to the shark. If it happens too often then well most of us know what happens then...but never mind small fishes like us are entering market every day...some eat from the leftovers of the sharks but most also end up as food for the sharks.
You can practise your skills all day long, but it's comparatively easy to get better at playing. The hard thing is to get better at winning--anonymous