 Hi, my name's Leon Roe currency trader and trading coach at trading 180.com and welcome to this video on stop hunts versus Stop alerts now. I'm going to be going over the pros and cons of both I'm sure many of you are familiar with the pros and cons of stop losses I mean the obviously the pro of a stop loss is that your risk is Defined and if the market goes against you and you get stopped out, then that's it You've only lost your defined risk the con of that is That you end up being stopped out. So Many people hate losing so they hate being stopped out and there is something called Stop hunts and stop hunts are very very real the market does actively seek your Stop losses and they are literally placed in our most retail traders placed them in obvious places but if you don't like being stopped out and also The fact that when a lot of traders get into trades They get stopped out only for the market to go in their direction. So Let's say for example, we have Let's say I'm looking for an example Okay Right, so something like this, right Let's say they saw a level here Right, and they wanted to be a seller to the downside now They might have vented on any one of these candles. This is a one-minute chart But they might have faced their stop loss Somewhere above here. Then what happens is is price comes up spikes them out and Then price ends up going in their favor So in that sense The stop loss is not Great and if you had a stop alert, what would happen is is that you wouldn't be stopped out It would basically you would set a pending order or say an appending alert here So on your broker it would alert you that price is about to go is touching your your price limit And then you can make a decision as to where or whether you want to exit that trade or not And if you feel that you're being stop-hunted Obviously, you would maybe hold the trade for a minute or two or five or ten minutes and maybe see where the next candle closes and You know make your decision from there so the obviously the cons of Stop losses is the fact that you're going to be Stopped out a lot more than if you had stop alerts at certain levels now the stop alerts is One of the obviously the cons of stop alerts is the fact that if the market does continue to go in a Direction they continue to go higher Then and we the thing is we don't know that the more what the market will do Then you'll probably end up losing a lot more than you initially wanted to risk and for some people that's fine if you know, they've got a high risk reward and They got a high win rate Then they don't necessarily mind losing a bit more than what they risk on, you know certain trades and They normally get it back If they're if they're obviously managing their risk reward correctly, but the problem is is that Let's say for example, you're of the mentality or you're not necessarily experienced in Doing mental stops and you start convincing yourself that price Will come back and then all of a sudden price just keeps going higher and higher and higher and then What you do is you get yourself in trouble because You're then Hoping and wishing that the market comes back to at least your Your original stop alert level or at best your your trade entry now if the market never ever comes back When do you get out? You know a lot of people that said they don't necessarily like to take losses or they can't accept the loss and once they're in it and it puts you in all types of Psychological issues so while the pro is the fact that you might not be stopped out as much and you kind of avoid certain stop hunts the contour that is that you When you do get caught you could get caught quite badly now for those that do remember The well, this is the You know, there are flash crashes and I think they're happening more and more often In the market this was Last year the flash crash of the pound baffles traders with algorithms being Blamed and there are flash crashes that go on Again, this is a function of the markets whether it's caused by algorithms or a fat finger It's just what it is now you may get away with not being caught out by a flash crash or Like two years ago there was In 2015 or three years ago now it says on it the Swiss central bank stuns the market and this is where they kind of decoupled from the from the euro and One of them biggest market moves in a long time a kind of a black swan event And all it takes is one of those flash crashes or an unexpected central bank Policy shift that you know catches the market off-side and if you haven't got a Stop loss and even if you and even if you have you can get caught out by you know For example slippage and stuff like that. So matter of fact, let's go to a Swiss pair Right, and let's go back to Let's go to the dollar Swiss, right? Let's go back to 2015 Travel back in time. Right now. This was the move Look at this massive move here Right. This was the day fifth the January the 15th of 2015 and this is what caught the market off-side now I Was actually in a trade on this and I luckily had the broker. I used Had guaranteed stop losses. So I was guaranteed To get stopped out now. You might think to yourself. Well, why if I if you've got a stop loss Then you should be stopped out anyway And again, many of you know, we've been trading the markets for a while We'll definitely understand that you you're not always gonna get filled if the market is Volatile if you've ever tried trading the news during a high volatile news event. There's something called a slippage and You will get slipped. So your order. Let's say for example, you had a stop loss above this also below this level, right now your your Sell stop order is in a queue, right with everybody else's Sell order because if you're buying and you're placing a stop loss is a sell order now, you obviously have to have someone to sell to right but If nobody's going to buy your you know, if your order is not filled, right and The auction process and somebody's willing to you know, buy your Sell order because you're forced to sell by the way when your stop loss loss gets hit You are forced to sell to the counterparty right at a lower price. So let's say for example, you bought here at 1.0 2 and You'll be you'll be buying back. You're forced to sell. I should say at one point zero zero so you're forced to sell to back to your broker to your bank and they are literally buying back, you know, the The the currency at a cheaper price and you're selling it for a more expensive price But if your order doesn't get filled On your broker and you've got a stop loss around, you know, whatever level you might not get filled until somewhere down here or Somewhere down here or you know a worst case and it happened basically there were people that literally lost their livelihood there was a broker Al Pari that went Broke literally They literally went into liquidation. I think the broker FXCM had a lot of Trouble as well and there were you know private funds and individuals who literally lost, you know hundreds of thousands and millions and literally put them out of Business and not only put them out of business, but you know, obviously affected their their family and and they're definitely a future so Even with a stop loss You can get caught out by the markets if the market is volatile. Yes, these are black swan events They don't necessarily happen You know a lot, but it doesn't necessarily need to happen a lot and again depending on what time frame your trade It could just be an announcement, you know, there could be something with China, you know, North and South Korea It could be something over the weekend the political event that literally the market gaps and you are in Trouble, you know a flash crash or whatever. So Obviously the pros and cons of stop losses and stop alerts again, this is just my opinion But except the loss, you know, if you have to move your stop loss a bit more or you know decrease your risk Definitely do that if you're if you don't know how to, you know, I wouldn't say don't know how to trade But if you're comfortable with not having a stop loss and using a stop alert by all means You know do what you have to do But when it comes to anybody out there that's even considering a stop alert as good as it may sound in the short term all it takes is One time for you to lose everything so The pros and cons of stop losses and stop alerts. I hope you found this useful and take care