Dealers and Stops

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I don't think it's as easy for a dealer to just run a curreny to a stop as most people think. As a matter of fact, other than just a couple of pips, I think it would be very bad decision for a dealer to deviate any one single curreny away from the 'efficient' market (if it's even possible for them to do) and take on the risk of creating arbitage opportunities.

If anyone has any input, it will be greatly appreciated.

 

very interesting post :-) actually i think the reasons why small scumbag brokers dont like scalpers is for this reason broker borrow all clients positions temporary which gives them power to trade against clients if they want and i think its posible for them. An other example is CFD shares private persons dont know about cfd sharesthinking only of their own profits they believe they only can earn money in a rising stock market but no way banks brokers are hardcore traders

sailor

 

what exactly do you mean by 'trading against their clients'?

 

stop hunters.off course a broker will not have the strategy to pure trade against clients but i belive they can do so if they want. they will know the clients trading style after some time, they even put scalpers on their observations list. Think about if the broker have 100 small scalpers trading for example micro lots 100 * 1000 =100000 or = full lot = 10 dollar pip. just try and ask ur broker if u are are holding ur positions for some weeks who will earn on the peaks i asked my own but no honest answer lol

sailor

 

A stop hunter is a market player that attempts to trigger the stop orders of other traders for their own benefit. They generally have the capability to move the market by a small degree for a short period. The stop hunter may be a FOREX broker's dealing desk which is trading in competition with its customers or it may simply be a large player in the market; a bank, a hedge fund or whatever. link

One of the "ugliest" form of "stop-hunting" is used in some cross-rates during "fast" markets, especially after some important numbers are announced. One example is EURJPY, which is the crossrate of EURUSD and USDJPY. Lets say the numbers ar USD-positive and USDJPY is rising fast and EURUSD is going down very fast at the same time, that normally means that the crossrate EURJPY is very "stable" and shouldn't move at all. But all brokers in this case look where the larger stops in their "crossrates" are sitting and then either quote one of the two major currencies usdjpy or eurusd first to get the "crossrate" moving to the customer stops....I have seen this many times where crossrates have been quoted 20-30 pips away where the real market traded and all the "bucket-shops" got some easy money again... link

 
lowphat:
A stop hunter is a market player that attempts to trigger the stop orders of other traders for their own benefit. They generally have the capability to move the market by a small degree for a short period. The stop hunter may be a FOREX broker's dealing desk which is trading in competition with its customers or it may simply be a large player in the market; a bank, a hedge fund or whatever. link One of the "ugliest" form of "stop-hunting" is used in some cross-rates during "fast" markets, especially after some important numbers are announced. One example is EURJPY, which is the crossrate of EURUSD and USDJPY. Lets say the numbers ar USD-positive and USDJPY is rising fast and EURUSD is going down very fast at the same time, that normally means that the crossrate EURJPY is very "stable" and shouldn't move at all. But all brokers in this case look where the larger stops in their "crossrates" are sitting and then either quote one of the two major currencies usdjpy or eurusd first to get the "crossrate" moving to the customer stops....I have seen this many times where crossrates have been quoted 20-30 pips away where the real market traded and all the "bucket-shops" got some easy money again... link

Ahh! I was hoping someone would bring up a good point like this! Now in your assumption, you give the example of the broker not quoting a rate to spike the CrossRate. This will create a positive arbitrage opportunity. It will either come in its simplest form as a bi-broker convergence arb, or a nice little triagular arb....say.... on the JPY,USD,GBP or the EUR,USD,GBP. Now are we talking they cover more distance to hit a stop than can be mitigated by their spreads? Who is doing this? I want to take advantage of them.

 

lowpat a nice explananation thumbs up. nicholishen what do u think about what i wrote that they anaylyse their custommers, giving them and profile? lol well my last broker was talking bla bla bla he was thinking that i was a big nerd but the fact is that i remmember to much was he was telling which i will not say in a public forum but i lost arround 50 % of my small daytrade account no big deal cause i made it up with my longterm runs on other accounts.Stop hunter or not? But i cant prove it but i did se more than 20 times being stopped out by 5 to 10 pips where other brokers didnt had that peak. So i think when broker disconnect their servers they will have interest in having them closed for a while take it as a no trading area. And their disconnection can be true but the problem should be fixed under 2-3 min. The broker i use now has 3 servers and the backup is fast if they sommehow loose connection.

sailor

 
sailor:
lowpat a nice explananation thumbs up. nicholishen what do u think about what i wrote that they anaylyse their custommers, giving them and profile? lol well my last broker was talking bla bla bla he was thinking that i was a big nerd but the fact is that i remmember to much was he was telling which i will not say in a public forum but i lost arround 50 % of my small daytrade account no big deal cause i made it up with my longterm runs on other accounts.Stop hunter or not? But i cant prove it but i did se more than 20 times being stopped out by 5 to 10 pips where other brokers didnt had that peak. So i think when broker disconnect their servers they will have interest in having them closed for a while take it as a no trading area. And their disconnection can be true but the problem should be fixed under 2-3 min. The broker i use now has 3 servers and the backup is fast if they sommehow loose connection. sailor

Which broker do u use now?

 

Yes, server downtime is a big problem, but doesn't mean that they are stop hunters. The articles are very insightful, and I do believe that the big money (the level 1's) do play the stop game, but that is only one caveat in this dynamic market know as forex. Here is an article that everyone should read. FF actually made it sticky.

My challenge stands, and my question still unanswered. Who, as a Level 3 forex player is going to open themselves up to massive risk by deviating away from EBS and Reuters, thus creating arbitrage opportunities. Wouldn't it be reasonably logical that if retail brokers were stop hunting (not just conspiracy theory)- for every 'Stop Hunter' article there would be a 'How to Arbitrage Stop Hunters' article?

My challenge: name one retail broker who stop hunts their clients. Just one. That's all it will take to make consistent money in forex.

 

Sailor,

You are right as far as retail shops analyzing their clients, but it really doesn't go too much further than designating you as a good trader or a horrible one. The dealer will then use that information to decide whether or not to piggy back your trades (off-set your postition then hedge that offset with thier LP) or bucket your trades.

 
Nicholishen:
Yes, server downtime is a big problem, but doesn't mean that they are stop hunters. The articles are very insightful, and I do believe that the big money (the level 1's) do play the stop game, but that is only one caveat in this dynamic market know as forex. Here is an article that everyone should read. FF actually made it sticky.

My challenge stands, and my question still unanswered. Who, as a Level 3 forex player is going to open themselves up to massive risk by deviating away from EBS and Reuters, thus creating arbitrage opportunities. Wouldn't it be reasonably logical that if retail brokers were stop hunting (not just conspiracy theory)- for every 'Stop Hunter' article there would be a 'How to Arbitrage Stop Hunters' article?

My challenge: name one retail broker who stop hunts their clients. Just one. That's all it will take to make consistent money in forex.

You have to take in consideration that a "hunting" tick may have 1 mSec time : this is enough to eat your trade but not enough to be exposed at any arbitrage risk.

In volatil markets, which is a totally subjective concept, the spread is generally not guaranted and I have often see on my acc a 1 mSec spread widing just enought for the Ask to reach the SL of a short position : it's not very visible as the Bid doesn't move. Since most of the chart analyses are Bid based, they cannot detect anything, and even if they can, what to do ? to jump long on that higher Ask ?

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