[XMTrading: For FX beginners] What is stop hunting? Countermeasure explanation

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In order to provide a safe and reliable trading environment, XM makes sure to avoid any problematic behavior. However, there are rumors on the street that they are being hunted for stop. Is this information true?

What is stop hunting?

Stop hunting is the act of someone manipulating the chart in order to intentionally activate the stop loss settings set by the trader. Naturally, when a stop loss is activated, the position is cut at a loss, so traders who encounter a stop loss will incur a loss. There are two types of stop hunting: patterns set by large traders and patterns set by FX traders. I would like to introduce this as there is a possibility that the management is manipulating the rate.

Stop hunting by big traders

A large trader may place a large market order that suddenly breaks the price range where a large amount of stop loss would have been set. When a large order that causes a sudden change in the chart is placed, a large number of stop losses are activated at the same time, causing a chain of stop losses, which causes a large spike to occur in an instant. After that, the true direction will be revealed and you will be able to make a profit.

Stop hunting by traders

A technique in which a FX trader temporarily widens the spread so that a large amount of stop loss is intentionally triggered, and manipulates the chart so that the stop loss is applied for a moment. The spread, which is usually about 1-2 pips, spreads to several hundred pips momentarily, triggering a stop loss and forcibly closing the position. Stop hunting by traders is clearly illegal.

XM is not stop hunting

XM is not stop hunting. There is no evidence that they actually practice stop hunting. And there have been no reported stop hunts that would seriously undermine XM’s credibility. Stop hunting gives traders a disadvantage. For example, it loses credibility, spreads rumors as a rogue trader, and is disliked by traders. Those Forex brokers will be reported as malicious brokers and warned that they should not be used in the future.

Reasons why you may think you are stop hunting

XM is not doing stop hunting, but for some reason there are rumors that XM is also doing it. Why exactly is this? XM also holds a financial license, and zero cuts are also adopted. The reputation is very good. For individual investors, scalping and automated trading are allowed, and the support desk is very responsive, so it’s a reliable company with no troubles, but there are some strange rumors.

Influence of other companies

One reason is the influence of other Forex brokers. Because other Forex traders calmly start hunting for stops, the bad impression spreads throughout the Forex traders. There may be charts that some people find unnatural. As other Forex brokers keep running strange charts, users see that XM could do the same.

XM is NDD method

XM uses the NDD method, which has a very low possibility of intentional stop hunting. The NDD method is a method in which there is no dealer to manage customer orders, and orders are managed and sent to the market through a trading system. Since there is no artificial manipulation, we have realized a highly transparent execution method without stop hunting.

Stop hunting is likely to occur in DD traders

Forex traders and some overseas forex traders adopt the DD method, and stop hunting is likely to occur at DD method traders. DD companies sometimes do not send customer orders to the interbank, and what happens to orders actually placed by traders is a black box. Even if you deliberately widen the spread and cause a loss to the customer, you do not know because there is no conclusive evidence.

Timing that is easy to stop hunting

XM does not stop hunting, but it is possible to stop hunting by speculative moves, so be careful. It is an effective countermeasure to be aware of the timing when it is easy to stop hunting. At what point does this occur?

Currency pairs with low liquidity

It is said that stop hunting is likely to occur when trading in currency pairs with low liquidity. Currency pairs with low liquidity have low trading volumes, so large orders can easily cause price fluctuations. Stop hunting occurs because institutional investors can change prices.

Period of low liquidity

The illiquid market is the Asian market. There are no economic indicators during Asia time, and regions outside of Asia are generally asleep, so price fluctuations do not occur. During times when there are few trading participants, the trading volume is also low, so it may fluctuate rapidly if a large number of orders from institutional investors are received.

Price range where a large number of orders have accumulated

Be careful about the price range of the range. Price ranges where a large number of orders have accumulated are the most likely to be targeted. Once you get past the point, it’s easy to take a big direction all at once. If you break through the resistance line, you’ll be gone all at once.

key economic indicators and politics

Economic indicators are said to be prone to stop hunting. In a market where sudden fluctuations are likely to occur, stop hunting by speculators is likely to occur. It is better to avoid trading during these times in the first place, as they are fundamentally volatile. Also, pay attention to politics. When a war or civil war occurs, the market becomes quite chaotic. Sudden ups and downs are likely to occur. Traders should always keep a close eye on the news.