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Alison Heyerdahl
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Alison Heyerdahl
Edited by
Alison Heyerdahl
Head of Content
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Author
Author
Chris Cammack
Partner Manager and Financial Writer

<p>Chris manages the relationships with our partners to provide our users with the best Forex trading experience possible. Chris has 15+ years of experience in research, editorial and design for political and financial publications. His background has given him a deep understanding of international financial markets and the geopolitics that affect them.</p>

Learn more about Chris Cammack

Forex Stop Hunting Strategy

Reading time: 2 min | Advanced Education | Trading Strategy

Between 65-90% of retail Forex traders will lose their entire trading account, in large part because they don’t know where to place their protective stop losses. Institutional traders are the ones who profit from individual trader losses as there is a predictability in the behaviour of retail traders, and how they trade the Forex market. Institutional traders like banks, hedge funds, investment firms, and dealing desk FX brokers, are notorious for exploiting these behavioural predictabilities and push the price levels through these barriers in an effort to hit the stops and close the trades of retail traders in order to free up liquidity. Stop hunting has a negative connotation among retail traders because they think their individual stop losses are targeted deliberately. In actuality, Institutional traders are only looking for significant clusters of stop-loss orders that are gathered at visible technical levels.

Stop Hunting Strategy

Institutional traders will buy at the levels most retail traders place their stop losses at. As an institutional investor trading larger volumes in a single trade, it’s harder to get an order filled.  Occasionally, in order for a large order to get filled, the institutional trader will need to generate the liquidity themselves.  And, as retail traders hide their stops at obvious technical levels, this becomes an excellent source of liquidity for the big players to target. Most common technical levels that retail traders use to hide their protective stop losses are:

  • Support and resistance
  • Previous swing high or swing low
  • Big round numbers
  • Above/below technical indicators
  • Above/below chart patterns

Forex Stop Hunt Strategy Stop losses will be crowded around these obvious levels, and institutional traders will bid the market at those particular technical levels, so they can get the needed liquidity to fill their big orders at the expense of the retail traders.

How to Profit from Stop Hunters

To be able to profit from stop hunting you must first understand why stop hunting occurs before you can identify when a stop hunt will occur. A stop hunt is more likely to happen when there is a significant build-up of stop-loss orders below, or above, important support and resistance levels.  The institutional investors are able to hunt stops because they understand the retail trader mindset. Once the stop orders are hit, provided there is enough liquidity, it will force the price to move lower and start a cascade of triggered stop orders. Institutional traders will be able to take their profits and buy back at a much better price. One of the most common misconceptions retail traders have is that the more obvious a support and resistance level is, the more reliable that level becomes.  As this is not true, and it is known how retail traders think, this information to a trader's advantage.

Instead of going long at a clear support level, which has already been tested several times, you might want to go short and trade like institutional traders targeting the stop orders below the obvious support level.

Forex Stop Hunting Strategy

A good Forex stop hunting strategy requires two things:

  1. Identifying clear technical levels that retail traders might use to hide their stop loss.
  2. Entering a position that seeks to target those stop loss orders.

Conclusion

The market exchange rate will reach obvious stops most of the time, so don’t use the obvious levels to hide your stop, and instead put your entries where the retail traders put their stop losses.

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Meet the Experts Behind Our Unbiased Reviews

Chris Cammack

Partner Manager and Financial Writer

Chris Cammack

Chris Cammack is partner manager and senior financial writer at FxScouts, specialising in broker relations and forex market analysis. As the former Head of Content (2019–2024), he set editorial standards for all content published at FxScouts, including broker reviews, broker comparison pages and education.


With over a decade of experience in editorial management and partner relations, Chris builds and maintains our relationships with our partners to provide the best Forex trading experience for our users.


He also co-hosts the “Let’s Talk Forex” podcast with Alison Heyerdahl, where he explores trading strategies, industry news, and macroeconomic trends to help traders navigate the markets with confidence.

Alison Heyerdahl

Head of Content

Alison Heyerdahl

Alison joined the team as a writer in 2021. She is the Head of Content for FxScouts. She has a medical degree with a focus on physiotherapy and a bachelor's in psychology. However, her interest in Forex trading and her love for writing led her to switch careers. She has a passion for Forex trading and over a decade of editorial experience researching Forex and the financial services industry, producing high-quality content. She hosts a weekly podcast, "Let's Talk Forex", alongside Chris and has produced over 100 Forex educational videos for the FxScouts YouTube channel. She also writes weekly technical analyses and has tested and reviewed over 120 Forex brokers.

Ida Hermansen

Financial Writer

Ida Hermansen

Ida is a financial writer with a degree in Digital Marketing and a strong background in content writing and SEO. Her expertise extends beyond marketing and writing, with a keen interest in cryptocurrencies and blockchain networks. Ida's passion for crypto trading sparked a deeper fascination with Forex technical analysis and price movement. She is continually expanding her knowledge in Forex trading, staying informed about the latest trends and identifying the best trading environments for new traders.

Stefan de Clerk

Financial Writer

Stefan de Clerk
The newest member of our team, Stefan has a degree in Marketing and more than a decade of experience writing quality content in both finance and tech. Stefan's deep fascination with how factors like geopolitical events, big data and market sentiment influence the financial markets drives his passion for Forex trading. He believes that if you want to feel the pulse of the world economy, trade Forex, and if you want to trade Forex, you need well-researched, unbiased and objective information.