What is a Stop Hunt in Forex?
Quick Answer: A stop hunt is a deliberate price probe through obvious liquidity pools of clustered stop-loss orders, often followed by a quick reversal once those stops provide fill for larger players.
Understanding Stop Hunts
A stop hunt occurs when price probes liquidity around obvious stop-loss levels before resuming its prior direction. Large players exploit clusters of stops to trigger cascades of orders that provide liquidity for their own positions.
Recognizing Stop Hunts
They often appear as sharp wicks beyond recent highs or lows, especially near support/resistance or round numbers. Volume or tick volume typically surges during the probe.
Liquidity Pools
Map prior swing points where retail traders likely place stops. These areas are prime targets for liquidity hunts.
Defending Against Stop Hunts
Place stops beyond obvious levels, use structure-based exits, or scale out before congested zones. Confirmation from order flow tools or imbalances can help differentiate genuine breakouts from liquidity grabs.
Chasing the Move
Avoid joining the stop run late; price often snaps back quickly, leaving late sellers trapped. Wait for confirmation before entering new trades.
Related Terms
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