Law of Demand and Supply! Listen to the voice of the chart! The mechanism of stop hunting

There are investors who want to buy, so there are sellers who can sell.

There are investors who want to sell, so there are buyers who can buy.

This is the backbone of the financial markets, and it is through such trades that the law of supply and demand is created. This is the basic strategy used by market manipulators when trapping individual investors. No matter how far it falls, reaching a bottom seems invisible, because there are investors who will buy, so the price is set. Once that happens, the downtrend will continue gradually until more investors cut losses.

While the market is in a gradual downtrend, to shake awake investors who have accumulated unrealized losses and are escaping reality, harsher price movements are deliberately driven to knock the stock down. If a sharp drop is followed by negative news to create total despair, losing investors cannot bear the fear and, wrapped in desolation, place stop-loss orders. But the manipulators will scoop up all those stop-loss orders, creating a bottom.

If even when causing a dramatic drop, investors holding unrealized losses do not cut losses, the basic strategy of manipulators is to continue with information control to foment total despair, alternating between a continued downtrend with a sharp drop and a rapid rebound and rise, to shake investor psychology until they cut losses.

When the targeted prey panics and sells off, the manipulators gladly buy up. When investors with unrealized losses panic and dump, and the manipulators buy up the dumped shares, the selling supply in the financial market dries up, making it easy to buy up without resistance.

Of course. They bought up the stocks they wanted to dump, so it’s natural that there’s little sell-side depth and the price rises easily.

The manipulators continue to buy until new buyers who want to purchase enter the market. And when the number of new buyers increases, the manipulators who bought at the bottom push those shares back onto the market. After the buying-from-the-bottom jump catches the market and the price surges, the manipulators take profits and exit, so there aren’t enough buy orders to push the price higher, creating a heavy ceiling. A rebound phase, a slow upward phase, and a slow downward phase are recognized as movements driven by algorithmic AI high-speed trading.

Why does it reverse when I cut losses? You understand now why those who complain about that lose too, right?

Can you hear the chart’s voice? Remember that investing is a relative game ∩(´∀｀)∩

The actions investors can choose are: buy, sell, or hold. These three principles are fundamental. Many beginners, underestimating these, mistake that financial markets rise and fall naturally and fairly.

Fundamental and technical elements are information prepared by the manipulators and are merely convenient post hoc reasons. Let me explain with an analogy ＼(^o^)／

Assume the market has two participants. In the currency market where a billion-dollar trader A and an naive investor B trade, how would the price move? Since A has ample funds, he continuously places limit orders on both the sell and buy sides, and he moves around by taking his own limit orders with market buys. Seeing a chart rising, a panicked B, who has delayed buying, gradually panics and jumps in. When B buys with all his might, A can tell, so A continues to place limit orders on both sides and then uses market sells to eat into the buy orders and cause a crash.

Then B wonders why when he buys the price suddenly rises, stops rising, and then turns and keeps falling, and he can only watch and can’t cut losses. Seeing his unrealized losses continue to grow, B thinks he has no talent.

But the truth is that A was moving the price, and after confirming B’s action, A pushed the price in the opposite direction. In other words, B was in a 100% losing bet. All financial markets, without exception, have the fact of widespread unlawful price manipulation.

So—do individual investors have no chance of winning?

That may seem so, but I think you can indirectly mitigate this risk by trading in highly traded stocks with many market participants. The financial market is a place where money, or actual ammunition, is exchanged and where wars are fought. That is why you must follow the intentions of manipulators who have formidable power. If you consider that you can move at your preferred timing after a target has taken action, it becomes clear that fundamental analysis and technical analysis are meaningless, right—orz

I thought about the mechanism of stop hunting by FX brokers.

At first glance, it’s common to see price breakouts from triangle consolidations. When investors have positions during these triangles, their stop-loss orders are typically based on nearby highs and lows and trend lines. During consolidation, many place similar stop-loss orders. As these stop-loss orders accumulate across the market, manipulators may profit by taking the opposing side after triggering masses of stop-loss orders. Consequently, it becomes a scenario where your position is hunted down and then reverses.

There may be a possibility that FX brokers sell client stop-loss information to outside parties, and interbank dealers reportedly know each other’s order statuses. I heard this from Yoshihiko Kobayashi, president of Hirose Trading, during a premium reflection session of the Hirose Real Trade Battle, so I find it credible.

About ten years ago, I heard this from Yoshihiko Kobayashi, president of JFX, so it might be my misunderstanding or memory error.

If it’s true that you can know the other party’s order status, avoiding stop-hunting would be impossible. The only option would be to set stop-loss orders that avoid values likely to be hunted (o^-')b