Stop Hunt
liquidity tactic
Stop Hunt is a deliberate price movement designed to trigger stop-loss orders placed by traders near predictable support or resistance levels. Once those stops are activated, price often reverses quicklyÔÇöleaving the original traders shaken out and market makers in control of the new position.
This tactic is commonly used by whales, hedge funds, and market makers to generate liquidity. By driving price into zones where retail participants have placed clustered stops, large players can fill their own orders more efficiently while clearing out weak hands. These engineered moves often appear as dramatic wicks, flash crashes, or fake breakouts.
Stop hunts are most effective in low-liquidity or high-leverage environmentsÔÇösuch as crypto and forex marketsÔÇöespecially around major news events, thin order books, or emotional trading peaks. They are not anomalies; they are strategic attacks on retail positioning.
Recognizing stop hunt zones helps traders avoid unnecessary losses and better time entries. Visual signals include sudden spikes with no follow-through, long wicks on volume surges, or V-shaped reversals that return to the original price range within minutes.
Use Case: A trader places a long position with a stop-loss just below recent support. Market makers drive price slightly below that level to trigger stops, absorb the sell-side liquidity, and then reverse price upwardÔÇöleaving retail behind.
Key Concepts:
- Liquidity Harvesting ÔÇö Forces liquidations to fill large counter orders.
- Retail Trap ÔÇö Targets obvious stop-loss zones based on herd behavior.
- False Signal ÔÇö Creates a fake move before resuming true direction.
- Manipulative Intent ÔÇö Stop hunts are calculatedÔÇönot accidental volatility.
Summary: Stop hunts are engineered liquidity grabs that exploit predictable retail behavior. They serve as a reset tool for market makers, creating the illusion of breakdowns or breakouts before the true move begins. Awareness of stop hunt zones helps traders survive volatility and reposition smarter.
| Signal | Stop Hunt | Legitimate Breakout |
|---|---|---|
| Price Behavior | Fast spike with reversal | Sustained move with follow-through |
| Volume Profile | Sudden burst, then fade | Steady build across candles |
| Orderbook Impact | Clears clustered retail stops | Eats through real resistance/support |
| Market Reaction | Snaps back to origin zone | Holds above breakout level |