It’s a hard fact to swallow sometimes but the fact is that the markets are only 20% trade 80% speculation. I often find unless there is HUGE economic data a trend will not turn on sixpence. Common sense should always be applied as should the trend!

The above image is nothing special and can be commonly found though-out the FX market. The concept of stop hunting isn't a new one, and it should not be confined to the conspiracy files. It is something easily found on most charts and is easily exploited. Why is it easy? Because these pattern are easily seen on longer term charts and therefore harder to hide... You can’t hide a long term trend!

The best question to yourself is why would a trend suddenly spike or turn, take out stops and then continue with the original trend? We all know why! But we struggle to believe it because it goes against normal trading strategies.

The big players own the market, there is no point in arguing this fact, large players when in tandem will move markets; and always to their advantage. Why not spend 50 mil to move a pair to a price where you know there is 500 mil of stops and therefore cheap prices too take advantage of and send it in the other direction for huge profit.

We've all seen an absolute 100% perfect set-up, only to watch it go in our direction, reverse, take out our stops and then go in the direction we first predicted. We get angry and blame the markets! But we all know why it happened, the big boys know where the stops are, they move it and take advantage.

The large institutional traders do not buy at highs nor do they short at lows, they hunt for the most profitable levels. They know they can accumulate large orders without any fuss, why? Because that’s where the stops are placed and the market will not move violently because the supply is almost equal to demand at these levels. However they will always probe above or below to bring in the final stops.

So for me it’s always a question of; why is the price moving against the longer term trend? Where is the next level of interest? Is the pullback a natural movement or a spike? Could it be consolidation, slow stop hunt or is it an aggressive stop hunt? In either case common sense has to be applied.

The markets may not make sense to us, but when something happens that goes against the normal flow there has to be reason for it and for me its always a question of why? Why is the price doing that? Where is it going and where is it going to go after?

Hope that makes sense!!
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