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Stops Are the Strongest Force in the Forex Universe

17 Years ago | June 03, 2015 11/27/21, 12:00 AM

I have seen the term “stop hunt” being used more frequently, including the past few days, which seemed more like a stop tsunami as the EURUSD (led by a massve bund sell-off) led a general dollar retreat. I have written about the forex market being in a never ending quest to run stops and this was just another example. While this has always been the case in the forex market, the increasing influence of algos, which act like predators on a seek and destroy mission, has made stop hunting a trading strategy.

The following is a post on the Global-View.com Forex Forum and illustrates what I have been calling the new forex normal.  

Global-View Trading Systems
GVI Forex john 10:17 GMT 06/03/2015

As we indicated early yesterday, the stops up to the 1.1200 line were compelling to computer-driven systems and saw large stop-loss buying. My best guess is that there are still stops above the market, but not as many as yesterday. I think the Pivot Point ranges for today, based on yesterday's ranges, may be on the wide side.

Stops are the strongest force in the trading universe, because they are not discretionary. They MUST be executed. I recall on trading floors they were called "GMO Orders" (Get me Out!). This is why they are such tempting targets for the algos. If you are getting picked off, you might have to reconsider how and where you place your stops.

I feel we are back into range markets, which is the more "normal" state of trade. Think twice now about trying to trade the EURUSD like it is in a trend market. Also be aware that conditions are not as liquid as they were a couple of years ago. That means that daily RANGES are now likely to be wider than they once were. Forex trading is all about adjusting to new circumstances. It has always been so.

So when you trade in this new forex normal where ranges tend to be wider and liquidity at times can be an issue, adjust accordingly.

In this regard we are about to offer a way to take advantage of the market’s quest to run stops rather than being a victim of the stop hunters.  Send me an EMAIL for details with Stops in the subject..

Jay Meisler, founder

Global Traders Association 


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