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[jjs]

Is there a way to guard against such stop sweeping acitivities from the MM?


I can only think of 2 but not sure of their effectiveness:

1. A very small position size so that the stop could be placed way off the radar screen.  But this is not optimizing the working capital.

2. Not to have a stop at all.  But this means babysitting the trade all the time.

Could anyone share their experience?  Thanks.

[HC]

jjs:

1. I did not make myself clear on the issue of stop sweeping last round.  I think stop sweeping is not limited to MM, but also OTHER MARKET PLAYERS as long as they have the financial power to push a numbers of pips within a limited time.  Of course MM has the advantage of seeing the open card of other players, but popular chart based stop (eg: major horizontal line support) can be easily guessed by everyone, including you and me.  This is the place where you and I would like to avoid placing stops.

2. Though FX is touted to have xx billions turnover each day, I come the realised that the liquidity is not as good as it first sound.  Such xx billions is the total transacted volume per day, and my broker only contributes to part of this volume.   But this small portion of volume is not evenly traded throughout the day.  There are times when market is very quiet, and there are only a few players present simultaneously in that particular platform.  This present an opportunity for stop sweeping.  More so if the pair in question is less liquid.

3. On the question of what to do about this situation, I have no perfect solution.  Here are my thoughts.

3a. Size position small.  As you have already mention, this may not make full use of the working capital.  On the other hand, using a smaller position size but targeting a larger profit target (longer time frame) can compensate for this.

3b. Don't key in hard stop into the trading platform.  I don't mean don't use stop at all - I do keep a mental stop area when price reached there - just don't key into the system.  Write it down if you must.  This is very time demanding and we have to baby sit the position and constantly watching the price.  Depending on your trading style, this may or may not suit you.  Currently I am using this.

3c.  On the issue of small position size, if trading a smaller time frame, will usually result in very small and not meaningful profit, may I introduce you to scaling in, or add on the position in stages.  If you look at the TAF thread I mentioned earlier (see here for summary: http://www.chartistsunited.com/forum/index.php?topic=547.msg2533#msg2533), you will impressed with the trading result with a very small starting position.  This is basically start with s smaller size, add on (attack) when price move in your favour.  Then scale out when momentum is lost, leaving the first small position if you wish.  A very similar strategy to Turtle trading rules in principle, but the actual mechanics is different.

3d.  The use of EA, expert advisor. There are some EA that monitor the overall P&L, adjust trailing stop, close trades for you real time.  Some you have to pay, some are free.  Here is one that I heard is good, called swiss army EA (http://www.forex-tsd.com/expert-advisors-metatrader-4/7552-swiss-army-ea-automatic-order-management.html).  Please note: MT4 platform only.

This is what I can think off now.  Hope it helps.

[jjs]

Hc

Thanks for the further details.  I was at page 8 of tfi's excellent thread in the ff before I got distracted by the similarly excellent thread started by feb.  Just came back from a holiday trip and will resume reading the 2 threads.

Initially, I thought scalping / not leaving any open position overnight was the way to go as far as the stop sweeping is concerned.  Although I find it "fun", it is not something that I would be able to do on a sustainable basis.  I prefer a near- to medium-term play without the stress associated with day trading.  From what you've said, I have a general picture about scaling in / out.  Will read up further on that.

[jjs]

Another long shadow spotted on Saxo chart that is not present in MT4.

One thing  I am not sure about.  Would like the masters here to teach me 

Stops sweeps are presumably to take out stop-loss order?  In the case of the USDCHF, it's a rising trend.  Any orders above are presumably limit orders or T/P orders.  Is there any sense in running those orders?  Or is there something that I should be aware of?

Thanks

[HC]

jjs:

No master here, but  the way I look at it, this is how it happen:

Someone using SAXO platform shorted UC and place a protective stop loss (buy) order just above 1.2100 . At around the time in question,  UC is trading at 1.2051, and there are very few  order above 1.2060.  MM just widen the spread to 1.2105, stop loss got triggered, nett loss was charge to that trader's account, MM reduces the spread to normal 3-6 pips range and business continue as usual.

The nett result is, MM is richer by (1.2105-1.2055) 50 pips, while that trader is down 50 pips.  Notice that if his stop did not get triggered, he can exit at breakeven now; or at worst at 1.2085 +- incurring a loss of 30 pips - not 50 pips.