Stop hunting versus stop clustering: what is actually going on

[Amanhasnoname]

Plenty of traders are convinced that brokers hunt their stops. Sometimes that might be true, but a more boring explanation covers most cases.

Stops cluster. Beginners put them under the last low, above the last high, and around round numbers. When price reaches those areas, a pile of market orders triggers together, pushing price through the level briefly before it moves on. It looks personal, but it's just mechanics.

Spread widening adds to the effect. On the bid chart a low may not have been touched, yet a stop on a long position can fire because the ask-bid gap grew at that moment.

The practical lesson is to avoid the obvious spots. Stops a few pips beyond clear swing points, or placed at a level that makes sense for the trade's invalidation rather than where everyone else puts them, get hit less often.

It won't remove the problem, but it makes it less consistent.

Where do your stops usually sit relative to obvious levels?