Tips for placing intraday stops

Stop placement

One of the frustrating things when you are trading intraday is to find that you pick a direction in a trade, get that direction right, but your stop was taken out before the trade moved in your direction.

Why does this happen?

Sometimes you might feel that your stop has deliberately been hunted! The truth is that sometimes it has. However, almost certainly this is not by your broker. unless your broker is very shady/unregulated. If you are unsure then you can check an average of prices on trading view to see what the general range of price being offered was. If your broker is consistently outside of that range, then just shift to a regulated broker.

Who hunts the stop?

Say you are a big institution with a large order to go long. The problem when you buy is that the more you buy, the worse your fill becomes. The solution? Buy where there is an abundance of orders. Where better than where a whole load of stops are? This way you can get your order filled at a better price. ‘Stop hunting’ is just a logical outworking of the market and is not particular ‘sinister’.

How to avoid the stop run?

Well, the answer is to place your stop in the second most obvious place. Look at a chart and see the most obvious place to put your stop. Avoid that place. Here are a couple of intraday examples. These are chosen at random and the stop placement is given which is less likely to get hit (These are not ‘trade ideas’, just illustrations to make the point) : 

Stop placement

Stops

Finally, you will start to find over time that the areas you initially placed your intraday stops are actually the areas you look to initiate a trade. So, for your next intraday trade why don’t you look for the ‘obvious’ stop placement area and enter your trade where you formerly placed your stop? Remember to pair the right currency pairs when you are doing this, but you will find that you are on the wrong side of the stop run far fewer times in this way.

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