Dear Retail Investor: Here's How Your Stop Orders Really Work
As described by Nanex LLC's Eric Scott Hunsader,
Retail stop orders await execution, typically at common price intervals (0.00, 0.25, 0.50) at the Wholesaler. Wholesalers know those price levels and can anticipate and exacerbate the downside movement to increase net profits.
How?
Wholesalers create a composite view of the Order Book (Bid/Offer at each Price Level) across all exchanges.
When the Wholesaler recognizes that the book pressure on the Offer side is much larger than available Bids, a clear sign that the stock is about to decline, the Wholesaler can react by adding more Short Sales to the Offer, further ensuring the Retail stop order limits gets pierced.
The retail stop orders then get triggered as the stock prices drops from the heavy Offer side pressure and few marketable bids.
After the rapid price dislocation, the composite view of all Exchange order books begins to balance out as Marketable Bids come into the market and offset the Offers.
The Wholesaler and HFTs then cover their short-sales, buying from Retail investors near the temporary low, just prior to the stock recovery.
The stock reverts, flash crash over.
And there you have it - instant profits and massive gains for wholesalers; even faster, high-frequency losses for retail traders. So easy, in fact, that a vacuum tube collocated next to NYSE's laser can do it.... about 1 million times per second.
(24 votes)
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And the Banks with Billion$ in orders to fill at the fix . Well it's not called a fix for nothing, ya know !
I got whipsawed once----once---never used a stop loss again----
I've been saying it for years - you cannot use stop loss orders in this market. The best option is to get out - but if you want to own stock you have to pick ones that you want to hold for a very long time - such that you are willing to accept the rapid ups and downs.
you have to play the greedy fucks. they can't resist an out sized retail order well below the current bid when you want to buy. with patience they will go down to get it. the same thing happens on the ask side when it is time to sell. they will make money anyway they can because all they care about is trade volume and making money. if you make money they don't care as long as they make money.
You can see it a lot day trading futures markets.
/CL really seems to get lots of pretty spiker candles to blast thru the stops.
Does anyone have knowledge of Fidelity using this tactic? Serious quesiton.
they all do it. the money is too easy and the best way to interpret "executed at the best price" means the best price for them because you just gave them some extra trading money.
read your prospectus. the outfit running my wife's 401k actually says they are under no obligation to do what you ask them to do. they are only obligated to give you the fiat equivalent of what your trade would have done had it been real.
all these brokers do
i trade FX With oanda. NEVER USE STOP LOSSES!! they all hunt them down and manipulate the shit out of them
Same as these guys. Called the trade, everything's going like clockwork, price action going my way, suddenly the price dropped, knocked out my stop, then proceeded on its merry way to new highs.
Fool me once....
here is a knee slapper...'fiduciary duty'....OK stop laughing ..it wasn't THAT funny.
same with the buy orders? price goes up?
Retail is dead, this is just a feel good opinion from a professional 'market' participant.
boo hoo any idiot stupid enough to use limit orders deserve to get shafted
Add to that the Fed's 5-year Spin-and-Rinse bubble-bust process, then you have a very broken, unhinged, used to be, middle class.
Any wonder why Obama just tightened gun controls? More to come.
Man, have I been cought in some of these. Thanks for the explanation & reinforcements of the crookedness of the "fixed" market & lunacy of any orders except instant execution orders!
never use stop losses, especially in FX
not sure what its like for futures but id imagine its the same BS.
You can't win
You can't break even
And you can't get out of the game
You CAN.
I've been in the markets for 15 years or so.
In paper I lost.
In the metals I made what I lost in paper and bought a 4 ha property with land, woods, water and a house, just in case.
So in fact it where some 15 lost years.
I quit 2013 once I realized that besides the crocodiles (HFs) and sharks (Banks) there are also the gozillas (CBs) in the market - massively, and for extended periods of time - and play their dirty games, with no market and just pushing back and forth to fleece and rape the rest in place.
In the meantime the trading junkey is back in life, dealing with real things and transforming that 4ha property into sort of a private universe and paradise.
I never ever will go back into that pool of beasts - just to get fleeced and raped. And I don't miss it. To the opposite: It's nice to come here at times - and watch the shit going on unabated - while I can lean back and enjoy the park, the flowers, the fish, the sun or food or whatever I like.
In fact I realized - everbody particpating in these markets - belongs to the money changers. Whether they like it or not. It's waste of time and it is no honest life or work - as it is based on the philosophy to steal from somebody else. Useless Parasites in fact. Jesus called them what they are. And it is still true.
So ...
You can win - in case you leave.
You can break even.
And you can get out of the game.
smart traders can still win.
You can win when you do the opposite of what the idiots are doing. If they're buying it, you sell it..... the market can easily be spanked selling options, where all the idiots are buying them
I have already said it a hundred times: only idiots and criminals and gamblers are still in these markets.
They get what they deserve.
Smart ones work and deal with real things. Where of course also theft and dumb and greedy sheeple are a fact - but at least you decide to sell or buy at whatever price - and not some fucking out of control Wall Street HFT.
Fuck the sheeple which let it happen and are dumb enough to still deal with those criminals.
The earlier they are all bancrupt and have lost everything - the earlier that beast may eat itsself.
Only idiots put their stops into the market.... idiots who like to get their faces ripped off