Dkam replies to: So brokers take trades, who cares…

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Obviously you don’t know how it works. You have to watch demos of those plug-ins available for brokers using Metatrader. Maybe it will open your eyes.

Stops are not run specifically for each individual trader (unless they target someone who is both profitable and have big account which is very very rare), but they know at some point that when the price can be pushed a couple of pips to some level, it will trigger enough stops to make them cash, let’s say $100,000. If it’s 5 pips away, it will let them cash let’s say $110,000. They don’t care who is going to stop out. It’s just a possibility. So the DD plug-in dynamically adds a new tick for, let’s say, go for the first option and let them cash out $100,000. If the price continues afterwards in the same direction, their intervention would not be noticed and would have been useless anyway.

But if the price reverses at that specific point which is usually at a major S/R area, their intervention would be fruitful. The impacted traders would just see the spike take out their stop, some would have a doubt and double check with other brokers. Those other brokers, if they have been honest that time, will not have that spike, but the support will just say it’s the price given by their liquidity providers. Those other brokers can also do the same thing from time to time but they can trigger the stop hunting at other places depending on their customers trades.

All this is automatically configured and all calculation are done in real time as soon as some levels where you have a big concentration of stop losses are reached. There is nobody who does it manually. So, yes I guess they are right when they says they are a Non Dealing Desk broker, because….it’s processed automatically in a fraction of seconds.

They can also play with feeds coming from their different liquidity providers. They get different prices when there is a lot of volatility. Hence they can give you the quote that is the most favorable for them.

Note that stop hunting can be also done at other levels, by the liquidity providers themselves, or even above, by the banks.

But there is so many other ways than stop hunting for a broker to increase easily his profits on your expense.

The challenge for the brokers is to do that as discreetly as possible when they want to take care of their reputation. So basically they would not want to slip the price to 20 pips. And it is not illegal at all as soon as they warn you in their Terms of Service that they can act as a market maker, which they all do. That means that they decide of the prices they quote you at any time and you just have to accept it.

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