A Query on Stop Loss Hunting

Technical Analysis
#1

Hi All,

I have seen this been a topic of being an urban legend of stops being hunted by institutions and zerodha :roll_eyes:etc. I dont buy into it but today like couple of other trades made me curious. I see speculation as a game and am more than happy at challenging myself and other traders so i got back into it based on price action and was able to reverse my loss. (based on my risk capital)

have attached the screenshot with the white line as the Stop Loss Target. which got hit +3 points

Could you anyone share an insight into if this is because i placed it a statistical point of SL (where most traders will place SL) i did not place at the Vwap(yellow Line) nor the 20 SMA (red)

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#2

Well, I have seen the institutional desk and you are almost right. Though I won’t understand why you mentioned Zerodha herein, but by institutional clients - definitely yes. Have you ever seen how just before results a stock drastically move upwards and in the same proportion downwards before coming back to the starting point? This is even before the results are declared. The problem with Technical Analysis and hence the stops is everybody is betting on the same support/resistance and reversal points.

What is the advantage? Basically, if you wish to get a lot of stocks or sell a lot of stocks the stops are the points where you can easily get it. And you probably may not know this … but exchanges sell the market depth. You see only the tip of the iceberg - that is 5 bid/ask rows, but exchanges charge a bomb for giving you 20-25-30 market depth data in realtime. And institutional clients find this market depth worth every penny to have deeper understanding of these very points on technical analysis.

Take Away - Be a little smarter than the crowd. Place stops at little farther than what you think the herd is gonna do.

Regards,
Risk.Money

7 Likes
#3

Hey RM,

Agreed on placing the stoploss far away. infact it was at 40 points below the current SL but i did not want to lose money so i kept it 15 points below days low…i was actually laughing when seeing the price fall there and reverese. interesting info on the desk…

as for zerodha - i remember reading a thread of how zerodha sells our SL (title - Zerodha shares our trading SL with operators) 3 years back…

#4

I know … :slight_smile:

No way that can be true. I am pretty sure when @nithin said working on new business line - he meant lending and not this :wink:

Also, it is only advantageous to buy market depth from someone who has the whole market picture which are the exchanges and not brokers. Half knowledge - about market view is more dangerous in this case.

#5

Hmm… there is something called tick by tick data feed by the exchange, you can get the entire market data on it.

#6

Oh! This is incredible. You are right. Found the article which talks about the recent development about - Stock exchanges to provide tick by tick data feed free of charge: Sebi.

I think NSE would love to resolve the colocation case by this offering, where earlier it did just the opposite - preferential access.

Anyhow, this would definitely be a first in the world - free of cost. I still doubt if this will be only L1 data (top of the book) or market depth as well. Interesting.

#7

It is free of cost, but to consume tick by tick, you need to be on the exchange colo. There is a cost to be on the colo.

1 Like
#8

Ok. Yup … Does make sense.

#9

bro you can fool everyone by using virtual stoploss… only mt4 trader are aware of it… but its works in NSE BSE too… even the programmer in India don’t know about this

#10

Only issue I faced with virtual stop loss given my tf is 5 min…is that I have to stay glued to the screen

#11

Care to explain,sir?

#12

Guys, actually it may not be such a big deal that we are making it to be. It is not about seeing those orders in first place but about plain demand supply. If someone wants to take a big position concentrated stop-loss (@support/resistance) will automatically be the point where it is easily available. And you will see the chart reverse once that bear or bull out of the picture from the very point since his huge order got filled. So it may be just a matter of demand supply … that one may think of hunting … which sounds like a conspiracy theory.

Either way doing sth different from the crowd is always advantageous.