Can brokers (market makers) shake you out of a stop?

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Can brokers (market makers) shake you out of a stop?

Postby User » Thu Jul 09, 2009 7:58 pm

Forum transfer: Submitted by Thexder on September 26, 2007 - 01:01.

I know in stocks there are market makers who have the capability of manipulating the value just a little to trigger people's stops set just outside some range, but how does it work in Forex?
When you read about the difference between forex and stocks in books they talk about the trillions traded daily and how it's virtually impossible for anyone to manipulate the price, but I've seen discussion about this happening anyway, so how does it work?

I am guessing each broker can somehow do some manipulation between the trader and the other exchanges they are dealing with, to manipulate things...so what are their capabilities and to what extent (just a few pips? Or if you have a stop like 10 or 20 or more can you still be falsely shaken out?)
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Re: Can brokers (market makers) shake you out of a stop?

Postby User » Thu Jul 09, 2009 7:58 pm

Forum transfer: Submitted by User on September 26, 2007 - 11:44.

I was also wondering if there are any laws/rules that regulate such manipulations... Is it legitimate for brokers to hunt stops? Do they actually do that..?
May be we could send one or two brokers support tickets (friendly of course) about legitimacy of such manipulations if any :)
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Re: Can brokers (market makers) shake you out of a stop?

Postby User » Thu Jul 09, 2009 7:59 pm

Forum transfer: Submitted by Skyfx on September 26, 2007 - 19:59.

As far as I know no such thing as brokers stop hunting exists.
How could they possibly do such cheating... It is like you are in a casino playing poker and a casino dealer is spying on your cards...
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Re: Can brokers (market makers) shake you out of a stop?

Postby User » Thu Jul 09, 2009 7:59 pm

Forum transfer: Submitted by Nick on October 4, 2007 - 15:47.

That's exactly what happens, Skyfx!
They spy on your "cards" because it cost them nothing to spot where most of their clients have placed their stops. It is so easy!

Besides, speculations with currencies are not prohibited; Forex brokers may quote you prices they want within reasonable bounds to secure their side from losses that may occur especially during rapidly changing markets, therefore, their prices that may be different from interbank rates.

I suggest, be aware of news time and market open like NY and London. If the price gets way too close to the zone where majority of broker's clients have placed their stops, stop hunting becomes so innocently real: only a small spike during news release or market open and everyone knows it was time of huge volatility, but not everyone realizes that some shots in this volatility were contributed by Forex brokers...

Nick
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Re: Can brokers (market makers) shake you out of a stop?

Postby User » Thu Jul 09, 2009 8:00 pm

Forum transfer: Submitted by Greg B. on October 10, 2007 - 15:56.

I thought it would be interesting, I have picked it up from Wikipedia
http://en.wikipedia.org/wiki/Foreign_exchange_market

"Some retail forex brokers have been accused of routinely manipulating spot market rates in order to trigger their clients' stop-loss orders and other unethical practices. Industry insiders can confirm this, but since the currency market is largely unregulated, this practice may not in fact be illegal."

Greg B.
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Re: Can brokers (market makers) shake you out of a stop?

Postby User » Thu Jul 09, 2009 8:01 pm

Forum transfer: Submitted by Ted on October 14, 2007 - 15:40.

Most of the traders trade with stops. It is a paradise for Forex brokers.
Traders need those stops because their accounts are so leveraged, that if to deny such stop loss protection, traders risk receiving margin calls.

Hunting for stops is a regular practice for Forex brokers in my sole opinion. If you doubt that read carefully the agreement you made with your broker. There they state they are not liable for... almost anything regarding the market price quotes irregularities.

Ted
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Re: Can brokers (market makers) shake you out of a stop?

Postby User » Thu Jul 09, 2009 8:03 pm

Forum transfer: Submitted by Dark Lord on October 22, 2007 - 16:30.

It is questionable whether stop hunting is a true fact or not. But you've got to be careful with market makers as they see your orders.

Either way, my suggestions on this topic is:
Don't place stops in the areas that are so obvious and could be preferred by many traders. Use more sophisticated places to set your stops.

Also while some suggest not using stops at all (it is dangerous, but could work, say if you are a scalper or came to trade for several hours and going to watch the price all the time), I would prefer to set stops anyway, but not a regular "scary" stops.

I set critical stops, which means that only in case there was a disaster falling off the sky it will be triggered before I get broke. Otherwise the price will never reach that point. 99,999% of the time I exit with manual stops.

Even if that 0.001% chance of being stopped out ever happen, by that time I will save on so many trades where I could have been stopped out should I placed my scary stop nearby, that the money I lose would not play any role in my overall trading performance.
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Re: Can brokers (market makers) shake you out of a stop?

Postby User » Thu Jul 09, 2009 8:04 pm

Forum transfer: Submitted by fry2010 on March 8, 2008 - 03:43.

You can look at other charts and see if the price actually went to where you placed your stop. If other charts are suggesting it never went there you have something to back it up when going to your broker.
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Re: Can brokers (market makers) shake you out of a stop?

Postby User » Thu Jul 09, 2009 8:09 pm

Forum tansfer: Submitted by Thomas on March 8, 2008 - 12:14.

Stop hunting exists and is widely used by market makers. They won't try to shake you out during normal or slow trading hours, but once liquidity picks up, they can effortlessly do their job, especially closer to news times and after the news. After all market makers earn money when you lose, and sometimes they need those profitable orders to be shaken out in order to ensure own profitability over the time.
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Re: Can brokers (market makers) shake you out of a stop?

Postby insider » Thu Feb 25, 2010 10:48 am

Hello,

Does anyone have bad experiences with Oanda? I know a lot of people on this site are clients with this broker. I have tried a few times to use breakout strategies. It seems that almost everytime I get stopped out, exactly to the pip most of the time, only to see the market reverse and go to the didrection I wanted right after.
This cannot be bad luck or just a coincidence. I really think I should stop giving my money to these crooks...

Insider
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