Submitted by Anonymous on Mon, 12/29/2008 - 13:57
I have been trading forex (mainly Cable) for a little while now. I place stops according to my money management rules. However, I have found that a number of times my trade is stopped out by long spikes in the candles. I am told that these sudden temporary moves are doings of "stop hunters".
Who are these hunters and what do they gain by such unethical actions?
A stop hunter is a trader (usually at a big fund desk) who tries to manipulate the market for a short period to get a beneficial price for him/herself.
By way of an example:
Imagine that the market expects that the price of Tullow Oil is likely to go up. A stop hunter will use a leveraged position to sell shares and lower the price a little and then buy a larger portion at the lower price expecting the bounce back upwards.
This means that if you have a long position on Tullow then you may get stopped out if the sudden downward spike hits your stop-loss limit order.
Sadly there's little that can be done about this, short of governments regulating trading practices.
Hope that helps.
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