Many times you'll feel like the market is "out to get you". You be in a trade, then the price will go against you, it'll hit your stop, you'll get out of the trade for a loss, and then it will turn back around and eventually hit your target!!! This has not only happened many many times to myself but to other traders I have spoken with as well.
My theory is this: there are many small traders like myself (we're called "retail" traders). Most of us have been taught by some sort of educational system - like Investools or similar. Many of those educational systems use similar set ups for entries - like the way I enter. And also, they use similar stops.
So, if there are quite a few people trading the same way and having the same stops (or basically in the same general area) then it would be beneficial to the market maker that IF the price got close enough to all those stops, then maybe the market maker could manipulate the price JUST ENOUGH to trigger those stops. If he/she could do that, then they would realize a great profit from all those stops (your loss, their gain).
I know that market makers can't move the market by large price amounts, but I do believe they can move it a little. And, a little is all they need.
Refer back to the last post with STZ. Look at the candle where I got stopped out. Now, look at some of the candles before that. Do you see how the price stayed above $15.25? Then on the day I got stopped out the stock opened and the price dipped all the way down to $14.77 then it bounced back that same day to close at $15.15. After that day it started trading higher.
Now, if you got into a position in STZ at some point shortly after 9/16/09 don't you think that where the bottom tail of that candle where we got stopped out is located would be where MOST people would place their stops?
When you place a stop in the brokers system, then it's there for the market maker to see. They can see where all the stops are located. And besides that, market makers are PROFESSIONAL traders, they are some of the best of the best - so it wouldn't take much of their market intelligence to figure out where most stops would be.
Go back and look at some charts and see where you'd get in and where you'd put your stops and see if you can find examples like this. Also, just keep this in your mind to see if you encounter this at a later time.
At this point in time, I have no real solid way of beating this repeatedly. But, if you can watch the market every day (even if it's at the end of the day) then maybe you don't put your stop in the system just in case a candle tail would stop you out. Just a thought.
Now, let's talk about Bigfoot...
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