A lot of Forex traders don’t trust their brokers. And don’t get me wrong, you should investigate your broker before giving them your money. And the most common concern is the belief Forex brokers are hunting their stops on purpose.
Forex traders think by placing a stop loss on their trade, the broker knows where it is and will purposely do something to knock them out of the trade. After all, getting your stop hit is quite common. You get into a perfectly good trade setup … then you watch price come right up to take your stop out before moving in the original direction.
I know… this is very frustrating. But you might need to look deeper to find the true culprit. It is more likely professional traders are taking out your stops and not the brokers. ( I really don’t think brokers care about our “small” trades ). Let’s talk about something that makes more sense.
As a matter of fact, you can use this as a Stop Running Setup to get into profitable trades.
Here is a typical stop running scenario. You, the novice at home trader have identified a good level to SHORT a currency pair. Once the short trade is placed, you protect yourself by placing your stop loss above the last swing high. And things see to go your way … until Price reverses direction and takes out your stop!
It is reasonable to suggest that the big traders also identified the short setup and want to make big money on the move. Therefore, they push price UP, knowing most people in the trade have their stop losses above the last swing high. And after that area has been reached, they reverse directions and place the short trade.
Doing this is beneficial to the pro trade in two ways. They get into the SHORT trade at a much better price with much more profit potential. Since they know the market wants to go short, they can create momentum by taking out the stops of the traders already in the trade … knowing those traders are going to jump back into the trade to try to recuperate their loss. So, the pro trader gets more profit and with more security.
So you see, stop running is much bigger than just you and me. Professional traders use this technique to make more money. You should be looking at the big players and not the brokers.
This is a clear example of how price action helps you anticipate the intentions of the big traders. This is important to know because they are the ones moving price. Price on your chart gives you insight into what they are doing and which way they want to trade … which you can use to trade WITH the pros, and not against them.
So, stop looking at your broker as the cause of your stops being taken out. It is unproductive and not going to help you get ahead in Forex. Learn to read price action and turn stop hunting by the pros to your advantage. The next time you see a perfect trade setup that reverses to take out the previous swing high or swing low … get ready to jump back into the trade and profit with the big traders!