Stop Hunts = Necessary Evil
Every stops being taken out is to service one of the purpose =
A) to push the price further in the institution trader's intention of price manipulation towards their ultimate intention i.e their ultimate intention is to buy at a low price say 1.0000, so they take out some stops at 1.0500 to provide liquidity for the short term move towards the cheaper price at 1.000. In this case, a sell stop at 1.0500 would have been consumed so the price could go further down.
B) to get enough orders for them to consume so they will avoid or limit slippage when they execute their market order and/or their buy/sell stops gets filled. i.e They manipulate the price towards 1.000 and take out all the sell stops so they can buy it (sometimes the buy stops AND its stop losses. A stoploss for a buy stop is a sell stop and vice versa)
For SGDJPY, if an institutional trader in Singapore or Japan wants to Short SGDJPY with a huge order, they need to manipulate the price to get more liquidity. If i was a reversal support/resistance trader and I already shorted this pair, I would definitely put my stoploss at the area I illustrated in the skyblue line at 77.35 to 77.50. My stoploss is FOOD for the bank traders. The rule of thumb is simple : The more obvious the S/R line is, the more likely it is becoming a manipulation zone/stophunt zone. So, if price breaks above Friday High and close above it, I would be looking a bearish signal. The higher it goes, the better .
If the bank trader wants to go Long and there is not enough liquidity (it's a Monday, of course, it is more likely not enough liquidity), a stop hunt is basic modus operandi to make sure your Long order would get spilled without slippage/limited slippage (also they could split their order which on the chart would cause a lot "re-tests of support" and ugly whipsaws (accumulation). If the price breaks and close below Friday low (preferably going at 76.80-76.60 (the lower the better), then I will be looking for a bullish signal there
Please read related post below.
A) to push the price further in the institution trader's intention of price manipulation towards their ultimate intention i.e their ultimate intention is to buy at a low price say 1.0000, so they take out some stops at 1.0500 to provide liquidity for the short term move towards the cheaper price at 1.000. In this case, a sell stop at 1.0500 would have been consumed so the price could go further down.
B) to get enough orders for them to consume so they will avoid or limit slippage when they execute their market order and/or their buy/sell stops gets filled. i.e They manipulate the price towards 1.000 and take out all the sell stops so they can buy it (sometimes the buy stops AND its stop losses. A stoploss for a buy stop is a sell stop and vice versa)
For SGDJPY, if an institutional trader in Singapore or Japan wants to Short SGDJPY with a huge order, they need to manipulate the price to get more liquidity. If i was a reversal support/resistance trader and I already shorted this pair, I would definitely put my stoploss at the area I illustrated in the skyblue line at 77.35 to 77.50. My stoploss is FOOD for the bank traders. The rule of thumb is simple : The more obvious the S/R line is, the more likely it is becoming a manipulation zone/stophunt zone. So, if price breaks above Friday High and close above it, I would be looking a bearish signal. The higher it goes, the better .
If the bank trader wants to go Long and there is not enough liquidity (it's a Monday, of course, it is more likely not enough liquidity), a stop hunt is basic modus operandi to make sure your Long order would get spilled without slippage/limited slippage (also they could split their order which on the chart would cause a lot "re-tests of support" and ugly whipsaws (accumulation). If the price breaks and close below Friday low (preferably going at 76.80-76.60 (the lower the better), then I will be looking for a bullish signal there
Please read related post below.
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