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FX Open Orders Tool.
Stop huntingis the practice of attempting to push market players of out their current positions by driving up the price of an asset to a point where many participants have chosen to set their respective stop-loss orders.
The activity of stop hunting is proven successful when punters place orders at what are fairly obvious levels. Circa, 10 or so points either side of resistance/support levels. Inevitably orders begin to amass in and around these levels.
Saxo Bank’s FX Open Orders Tool, allows users quickly and easily to get a real time sense on where these orders amass.
The tool may be used as a Sunday afternoon ritual so that you may start thinking about your levels, study your charts and take notice of any upcoming data releases and likely developments.
Therefore, as you look for potential trades, it is recommended that the stop loss is kept at the forefront of your mind.
Clusters represent a potential target for stop hunters
Best case scenario for the risk reward of any given trade would be a ratio of 1:3, but from experience this will average out to 1:2.25. This is merely a product of attempting to place stops away from clusters of other obvious stops.
Therefore, Saxo Bank’s FX Open Orders Tool is able to show you precisely where the clusters lie and thus allows you to infer on which levels will be potential targets for stop hunters in thin markets. The recommended strategy is to thus place stops which are away from the obvious levels represented in the clusters and avoid being chopped down by the tier one hunters. This also ties in closely to the argument as to why the desired risk reward becomes diminished.
FX Open Positions Tool
The FX Open Orders Toolis ideally used in combination with the FX Open Positions Tool, which give you the added benefit of understanding not only where the orders lie but also the positioning. This allows you to have a complete picture of how the market will interpret market events or even potential black swans.
We recommend the combined use of both tools as the association lies in the fact that either existing positions need to be exercised profitably (limit orders) or otherwise (stops). What the two tools can do for you, as a trader, is give you a clearer picture of where the market may go, not only as a result of volume and nearby orders but also its velocity.
The FX Open Positions Toolallows you to recognisethe remaining clusters of shorts in the FX space. In other words, if you are long going into any given data release and the numbers turn out to be positive, you can profit from the rise. You should also be aware that your profit target will likely not exceed that cluster of shorts in a quiet market and on an intraday speculative trade.
We trust that you will find Saxo tools to be as effective as they are for our traders both on a medium and short-term basis.
