This is one of the most ridiculous things I keep hearing. I had recently answered this on our reddit AMA thread. Copy pasting it here.
Do you guys think stop loss hunting is real thing? How would you guy prevent it from happening considering the huge amount of traffic on zerodha?
*Nithin: *
Firstly to know where what orders are placed, you can just subscribe to tick by tick (TBT) data feed from the exchange. Check this.
Stoploss hunting means, someone would have to move the market enough to get to the stoploss and then get the market to reverse somehow. Over 80% of all trading today happens in Nifty/Banknifty, I donât think anyone can just move around Nifty/Banknifty even if someone figured the stoploss. On Individual stocks too, most trading is concentrated in a bunch of stocks with very high liquidity where it would be really tough. If on illiquid stocks someone can control movement of stocks up and down, he must be like an operator. Where, what orders are placed is available on TBT feeds. There are many such conspiracy theories, mostly by people who donât want to accept trading losses.
A retail trader who can trade small position has huge leverage of being able to get in and out of a trade anytime. While those trade big positions (usually the people to whom these conspiracy theories are directed to) canât, imagine you are in a trade and canât get out because there isnât enough liquidity.
@Rajiv_Chongtham This is certainly a novice way of mindset, who blame for any misfortunes in their trades.
Ask yourself, do you think the broker or Zerodha might be/should be interested in taking your 200-1000 qtys?
Unless, you are a market maker who moves and gives liquidity to the market, your stop loss is out of question. The point you place your stoploss doesnt really matter to the market.
I Agree it might not dispaly the tick by tick dataâŚBut when market deapth was showing High and Low but why chart unable to show it ?
At least on daily candle ?
@nithin , but there are still some issues. All brokers arenât showing the same price as top or bottom. Even in NIFTY the last ATH shown in zerodha kite chart doesnât match with that of another broker. I didnât bother to check whose price was right, but at least print the correct price at ATH even if you have to rectify it manually, else people will lose confidence on your chart altogether.
On a daily chart All time high (ATH) will match because end of day we reconcile the daily OHLC using exchange Bhav copy. But on a min/hourly chart, the ATH will show only based on the price that we have captured from the ticks we have received, if we havenât received those ticks, it wontâ show up on the chart.
@nithin, chart not displaying all ticks is understandableâŚbut what could be the root cause for these sudden price spikes around SL orders which could not sustain long enough to even create sufficient price ticks to record in charts?
Nothing special about sl but logically people tend to keep sl around support or resistance levels, so around that levels we can notice sudden jump, as many will have sl or entry at those levels and everyone is aware of those levels we sometimes notice something called stoploss hunting, means price will break that level and clean up all stoplosses and will revert without continuing trend, retailers should be aware of this, experience should teach that.
@siva-reddy, dont take me wrong but you are contradicting Nitinâs earlier reply on stoploss huntingâŚas belowâŚ
@nithin
This is one of the most ridiculous things I keep hearing. I had recently answered this on our reddit AMA thread. Copy pasting it here.
Do you guys think stop loss hunting is real thing? How would you guy prevent it from happening considering the huge amount of traffic on zerodha?
*Nithin: *
Firstly to know where what orders are placed, you can just subscribe to tick by tick (TBT) data feed from the exchange. Check this .
Stoploss hunting means, someone would have to move the market enough to get to the stoploss and then get the market to reverse somehow. Over 80% of all trading today happens in Nifty/Banknifty, I donât think anyone can just move around Nifty/Banknifty even if someone figured the stoploss. On Individual stocks too, most trading is concentrated in a bunch of stocks with very high liquidity where it would be really tough. If on illiquid stocks someone can control movement of stocks up and down, he must be like an operator. Where, what orders are placed is available on TBT feeds. There are many such conspiracy theories, mostly by people who donât want to accept trading losses.
A retail trader who can trade small position has huge leverage of being able to get in and out of a trade anytime. While those trade big positions (usually the people to whom these conspiracy theories are directed to) canât, imagine you are in a trade and canât get out because there isnât enough liquidity.
The sudden spikes which arenât typically captured on charts are usually large market orders. So lower the liquidity in a scrip, higher the chances of a tick not getting captured on the chart.
This being around SL orders is your hindsight bias. It keeps happening all the time, youâd remember only when your pending order (entry or SL) got triggered.
The stoploss hunting @siva-reddy mentioned is different from the stoploss hunting being discussed here, @siva-reddy is talking about a high probability trading strategy that is based on the assumption of what price point a huge number of retail traders place their stoploss. You can learn about this strategy from YouTube and other sources, however itâs not at all an unethical practice, it is just another strategy like OHL ORB etc.
This is ridiculous explanation from Zerodha⌠If that is the case then why target order is not executed in the same way? I see all the time SL price trigger well before the actual price. I didnt see this problem with other brokers⌠I think definitely something fishy about Zerodhaâs strategy in hunting retail traders hard earned money⌠Simply not happy with Zerodha and will switch to other broker
