How do stop-loss orders work? Are they are target for market makers or big players? Until now I invest longer term in stocks, so I never had to use time orders like stop-losses. I set all my price alerts in excel. But I want to do more swing/day trading, and to manage the risk it often seems prudent to place a stop at the time I enter the trade. What happens when I place my stop? Does my broker immediately place that order in the market for everyone to see? Or, I'm guessing here, at a later time when maybe the price is closer to my stop? Or wait until the price is at that stop level and then sends a market order? As you can guess, I am concerned that some players are hunting for certain levels, and temporarily move the market in their favour. Obviously this is hard to do for the largest cap stocks. But for smaller stocks I would guess its much easier to temporarily drive the price in one direction to hit known orders (and maybe guess the position of some unknown orders) and then let the market reverse back to its old level. And if this is happening, is it not somewhat reckless of the broker to allow this by publicising such orders? I use InteractiveBrokers if that's important.
The only order type for everyone to be seen is the limit order. Stops are not known in advance. They’re just market orders triggered once conditions are met. They are either stored locally or on a server. Even if your broker has access to them … I don’t think they will disclose them.
Only your broker sees the stop order, but others can guess where stops are set and possibly go stop hunting.
With stops you reduce variance and unfortunately also the mean of your P/L (ceteris paribus; the benefits of risk control can of course exceed the downside, especially given Kelly criterion). Resting limit orders will be trash for most people unless you're trading in thin instruments, HFT participants use them as assured exits for asymmetric RR trades, and fill you at bad times. Do market participants care about where your individual order? For a start, it depends on your size relative to liquidity (market impact). Nobody cares much about one MES contract or one lot in the vast majority of stocks. If there's a tendency of retail participants to behave a certain way in aggregate it might be more interesting to sophisticated actors than your individual order is. Stop orders can be implemented at different levels, ranging from the exchange, to your broker's system, to your system (or simply your discretion). That obviously influences who might conceivably know about it, if you're paranoid. Understanding which is important regardless also since it impacts latency. Price can gap through your stops. Options (e.g. ITM calls or OTM puts + stock) is a more reliable way of capping your risk. But insurance isn't free. If you can implement your strategy without stops e.g. by adequate position sizing, or options, you will likely see better results, but it really depends on particulars of your strategy.
Unless your stop order is for a fair percentage of the trading volume in that stock, it is meaningless. "Popular" stocks, such as NVDA, AAPL, TSLA, etc., trade millions of shares daily, so nobody would "hunt" for a few hundred, or even a few thousand share stop order. Stop orders will be triggered often, but that is the nature of trading, but not due to some miscreant member of the community. Don't get me wrong, almost everyone trading would steal if they had the opportunity, it is just that the markets do not proffer that option.
stop hunting, a classic tactic used by experienced traders, market makers, and institutions to force retail traders out of their positions and accumulate shares at better prices. Breaking it Down: High of the Day (HOD) = Liquidity Zone Many retail traders and algo systems place buy stop orders at the previous high, expecting a breakout. Institutions know this and exploit it. Why Smart Money Sells Into Highs: Instead of chasing the breakout (buying at retail prices), they sell into the liquidity, pushing price lower. This triggers stop-loss orders, causing a cascade of selling. Running Stops to Accumulate Cheaply: Once price dips below key levels, retail stops get hit, adding downward momentum. Big players start buying at wholesale prices, filling their orders at a discount. After accumulating, price reverses sharply, and the cycle repeats. Why This Works: Market psychology: Fear-driven stop runs create panic. Liquidity hunting: Institutions need volume to enter trades without moving the market too much. Manipulation: Retail traders are baited into poor entries, while smart money profits. Key Takeaway for Traders: Don’t chase breakouts blindly—expect stop runs. Look for liquidity sweeps—false breakdowns that reverse quickly. Buy when fear is high, sell into strength—not the other way around. This is how the real game is played. You don’t buy retail, you buy wholesale. edited by ai written by m
Old saying, dentists last to the party, something like that. Using volume, often at extreme highs, volume is less. Which means smaller traders getting in near extremes and the Pro's are on other side of trade. Head and Shoulder patterns happen when smaller traders buy into market going higher, only to reverse.
the market don't know where it's supposed to go, when i buy i immediately set a buy stop higher to tell it go there go there!!