Forex Trading and Your Mind Set

A lot of Forex traders don’t trust their brokers. And don’t misunderstand, you should take care when choosing a Forex broker. The most common complaint that befuddles me is the claim brokers hunt stops.

Some Forex traders are afraid to place a stop loss on their trade because they think their broker will do something to move price and take out their stop. After all, getting your stop hit is quite common. You place a trade and your stop loss … and then price immediately reverses direction to take your stop loss out before moving in the intended direction.

Yes, this can have you screaming at your computer. But I think your anger is directed toward the wrong party. It is more likely professional traders are taking out your stops and not the brokers. ( I really don’t think brokers care about our “small” trades ). There is a more logical explanation of what is going on.

As a matter of fact, you can use this as a Stop Running Setup to get into profitable trades.

Here is a typical stop running scenario. You, the novice at home trader have identified a good level to SHORT a currency pair. You place your SHORT trade and place your stop loss above the recent swing high. And everything looks good … until Price reverses direction and takes out your stop!

It is reasonable to suggest that the big traders also identified the short setup and want to make big money on the move. Therefore, they push price UP, knowing most people in the trade have their stop losses above the last swing high. And after that area has been reached, they reverse directions and place the short trade.

Doing this is beneficial to the pro trade in two ways. They get into the SHORT trade at a much better price with much more profit potential. They also create momentum by taking out the existing stops … knowing they are going to jump back in when price falls again. The big traders that move them markets now make more profit, faster.

So you see, stop running is much bigger than just you and me. It is more likely the market makers moving price to take advantage of the small, novice traders. You should be looking at the big players and not the brokers.

This is a clear example of how price action helps you anticipate the intentions of the big traders. They are the ones that move price, after all. Price on your chart gives you insight into what they are doing and which way they want to trade … which you can use to trade WITH the pros, and not against them.

Stop getting so angry at your broker. It is unproductive and not going to help you get ahead in Forex. Learn to read price action and turn stop hunting by the pros to your advantage. The next time you see a perfect trade setup that reverses to take out the previous swing high or swing low … join the big traders for more profits faster!

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