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Stop-Loss Hunt: Quantum Stone Capital

Stop-loss hunts involve deliberately moving the price outside of its normal range to trigger stop-loss orders and encourage traders to take positions counter to the upcoming trend. This neutralizes liquidity and stops. Stop hunts typically involve 3 pushes or candles up or down, forming an M or W pattern as the high or low of the day is hit twice. The second push often fails to reach the high or low to trap traders who entered on the reversal.

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3K views5 pages

Stop-Loss Hunt: Quantum Stone Capital

Stop-loss hunts involve deliberately moving the price outside of its normal range to trigger stop-loss orders and encourage traders to take positions counter to the upcoming trend. This neutralizes liquidity and stops. Stop hunts typically involve 3 pushes or candles up or down, forming an M or W pattern as the high or low of the day is hit twice. The second push often fails to reach the high or low to trap traders who entered on the reversal.

Uploaded by

CapRa Xubo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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STOP-LOSS

HUNT

QUANTUM STONE
CAPITAL
W H A T I S A S T OP -L OS S
HUNT?

What is a Stop-loss Hunt (SLH)?

Stop-loss hunt is simply used to neutralize liquidity (stop-losses). The stop


hunt involves a deliberate movement outside of the range to what will
become the high or low of the day. The move usually occurs in three
pushes, which can be as simple as three candles, though you will sometimes
see a small pause in the form of a pullback in the middle of this.

The stop hunt has two main objectives:


1. Take out existing stops.
2. Encourage traders to commit to positions in a direction that is opposite
to where the real trend is going to be.

Quantum Stone
Stop-loss Hunt
www.quantumstone-capital.com Capital
S T O P - L OS S H U NT +
LOD/HOD + M/W
FORMATION
When a SLH is activated, it can be represented as the high/low of the day
(HOD/LOD). Once the HOD/LOD has been hit:

1. The spread is opened up by a few pips. This allows trader's orders to be


triggered outside their normal boundaries and they will be holding
negative positions from the outset.

2. It is common to see price undergo a further period of accumulation


lasting 30 to 90 minutes, which encourages traders to take further positions.
When there are enough positions, the price is moved in the direction of the
true trend and their stops will be triggered.

3. There is often a second move to the HOD/LOD, though most of the


time it will fail to take it out (so as to not give those who got in a profitable
position to escape from). This forms the typical W or M pattern. This is the
preferred point of entry for most of these trades, particularly the second leg
of the M or W. It is relatively slow moving and so there should be no
reason to rush or impulsively take a trade.

Quantum Stone
Stop-loss Hunt
www.quantumstone-capital.com Capital
M A N D W F O R M A TION

M type SLH (M formation):

W type SLH (W formation):

Quantum Stone
Stop-loss Hunt
www.quantumstone-capital.com Capital
SLH + REVERSAL

Market makers induce traders to take trades in the wrong direction by


using sharp and aggressive moves near the high or low of the day. One of
the ways of identifying that you are in the right place is that the market
will seem to be quiet, in consolidation and make a sharp move out of the
range, faking "the breakout".

If you were to take a trade in the area of the HOD/LOD, you might notice
that price is moving around but your position changes little. If you are
looking at the price board, you will see that it is "flickering red and blue"
with lots of changes suggesting that there is lots of activity, but in fact
there is little. When you see this at the right time of the day, you know that
the reversal is imminent.

Another observation during this period is that the spread widens. This is
done so that a broader range of orders can be collected and accumulated
during this period, making it even more difficult for traders to take profit as
they are in a losing position right from the outset. This occurs when there
has not been enough volume to make it worth their while to take a reversal.
In these situations that price is moved to the next level to further induce
positions to be taken in the wrong direction, against what is to become true
trend.

Quantum Stone
Stop-loss Hunt
www.quantumstone-capital.com Capital

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