If you’ve ever logged in to an actual forex trading platform you’ll have noticed right away – a number of wonderful options for “entering your order”.
You’ve got trailing stops, market orders, limit orders….then of course the “one cancels other order” – and the ever so complicated “if then? one cancels other order” – just to name a few. Each “order option” complete with its own little drop down menu’s providing you with “predetermined stop values” as well “predetermined take profit values” such as -25 pips, -50 pips etc……
Have you lost your mind?
The vast majority of Forex brokers act as “trading desks” – and in that small amount of time between you “placing” your order , and waiting anxiously to ” get filled” – your brokerage has placed the exact “opposite order” on their own behalf – trading straight against you, and more or less banking on the fact that you are dead wrong.
The “predetermined stop values” and “take profit areas” are seen across the entire platform – and targeted daily!
Ever wonder why no matter how hard you try to trade the smaller time frames / short-term action – you wind up getting cleaned out? Duh! – You are showing your broker ( who is actively trading against you ) exactly the level to hit your stop!
Add this little nugget to the list, throw in the current volatility and complete “gong show” we call the market – and once again take heed.
Do not try to trade this!
The Broker’s Playbook: How Your “Partner” Profits from Your Losses
Market Makers vs. ECN: Understanding Who’s Really on Your Side
Let’s cut through the marketing nonsense and get real about broker classifications. Market makers – the vast majority of retail forex brokers – literally make markets by taking the opposite side of your trades. When you buy EUR/USD, they’re selling it to you from their own inventory. When major pairs like GBP/USD gap down 150 pips overnight, guess who’s collecting those stop losses at predetermined levels? Your “partner” in trading success.
ECN brokers, on the other hand, route your orders directly to liquidity providers – banks, hedge funds, and other institutional players. They make money on spreads and commissions, not on your failures. But here’s the kicker: true ECN access typically requires significantly higher minimum deposits and comes with variable spreads that widen dramatically during news events. The $250 minimum account your market maker offers? That’s bait for the slaughter.
The platforms make it criminally easy to set those predetermined stops because they’ve analyzed years of retail trading data. They know exactly where amateur traders place their stops on USD/JPY breakouts, how tight retail stops are on volatile pairs like GBP/JPY, and which support and resistance levels get the most attention from technical analysis enthusiasts.
Stop Hunting: The Sophisticated Art of Retail Destruction
Stop hunting isn’t some conspiracy theory – it’s standard operating procedure. Professional traders and market makers deliberately push prices to levels where they know stops are clustered. On major pairs like EUR/USD, these levels are as predictable as sunrise. Round numbers, previous highs and lows, and those lovely predetermined stop distances offered by platforms create massive stop clusters that show up clear as day on institutional order flow systems.
Consider what happens during the London open when EUR/GBP volatility spikes. Retail traders using 20-pip stops get systematically wiped out as price action deliberately sweeps these levels before continuing in the intended direction. The pros call this “clearing the book” – removing retail positions that could interfere with larger institutional moves.
Currency pairs with lower liquidity, like AUD/NZD or USD/CAD during Asian sessions, are particularly susceptible to this manipulation. With fewer genuine market participants, it takes relatively little capital to spike price action just far enough to trigger those conveniently placed predetermined stops before snapping back to fair value.
The Predetermined Profit Paradox
Those neat little take profit menus aren’t doing you any favors either. When platforms suggest 25, 50, or 100-pip profit targets, they’re aggregating this data across their entire client base. Institutional algorithms specifically target these common exit points to maximize slippage and minimize retail profitability.
Real market movements don’t respect your predetermined profit levels. When the Federal Reserve shifts monetary policy or the European Central Bank hints at intervention, currency moves unfold over days and weeks, not the convenient timeframes your platform suggests. But retail traders, conditioned by these artificial profit targets, consistently exit winning trades too early while letting losers run to those easily spotted stop levels.
Professional traders think in terms of major technical levels, central bank intervention points, and multi-session price action. They’re not concerned with grabbing quick 30-pip scalps on EUR/USD during low-volume periods. They understand that meaningful currency moves require patience and position sizing that can weather the deliberate volatility designed to shake out weak hands.
Escaping the Predetermined Trap
The solution isn’t finding a “better” retail platform with different predetermined options – it’s abandoning this entire approach to trade management. Professional position sizing based on account risk percentage, not arbitrary pip distances, immediately removes you from the herd. When your stops are calculated based on actual market structure rather than convenient round numbers, you become significantly harder to target.
Focus on longer timeframes where short-term manipulation has less impact on overall trade outcomes. Weekly and monthly charts of major pairs reveal genuine trend changes that can’t be easily manipulated by stop hunting algorithms. The four-hour chart noise that dominates retail trading discussions becomes irrelevant when you’re positioning for multi-week moves in currencies responding to actual fundamental changes.
Most importantly, treat your broker as the adversary they actually are, not the partner their marketing departments pretend to be. Every feature designed for your “convenience” is simultaneously designed for their profit – at your expense.
Hey Kong, great post.
I remember learning all about this years ago in one of my trading books called “Beat the Forex Dealer”; I used to wonder why my stop losses were sometimes hit on the pip, only for the position to quickly reverse and go in my favor leaving me out of profit and money. I no longer trade with Stop/loses; of course I use mental stops like most everyone else who has been trading for a while. I only leave my Take Profit orders in now and some market orders, as I’m a contrarian and if I like a pair that initially goes against me I just see it as a deal, much like an item that went on sale. This of course only works well with a pre-planned scaling strategy filling smaller position sizes..
Fantastic David – you’ve clearly “run the gauntlet” and now have a “better than fighting” chance. Great work.
I too trade in a scaled fashion with no stops…..and also look to add when a trade provides “further opportunity”.
I hope other readers will learn something from our experience.
Aussie just can’t find a bottom – my long-term Squeeze seems for now to be playing out on the short side is it tells me! & Down she goes down, down…. if we do not bottom tonight or tomorrow well you know…
Hey Kong,
Do you still like the Yen here on what should be an eventual market sell-off? I’ve been scaling in (short USD/JPY) since we’re 103 now, could be the top, or possibly 105 before dipping/testing 100 again.
Also, just wondering if your views have changed on whether or not the USD will go down along with the market as you’ve been talking about before. I kind of think the market is just lagging the USD strength and that the USD will continue to gain when the market finally weakens. This is based off the fact that QE wind down should (and it seems the talk has) strengthened the dollar, which makes sense since QE is what played a large role in weakening it anyway.
It would be impossible to scale back / taper “QE” as markets would simply implode…although I must say – the “media spin” once again makes fools of most of us, and again the FED gets it’s way.
We’ve now got a “rock strong dollar” and an equities market at it’s highs – go figure…..perhaps Ben isn’t as stupid as we assume.
Now that USD has broken the trend of “lower highs” – anything is possible.