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banks don't hunt for your stop loss... here's how it ACTUALLY works — Transcript

by Andrea Cimi · 3,989 words · 559 segments · language en · Watch on YouTube

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0:00in the trading space especially the ICT
0:02related trading space there is this
0:05widely spread idea or we can call it a
0:07conspiracy theory that Banks somehow
0:10hunts for retail Traders stop losses and
0:12as humans we love to believe in
0:14conspiracy theories because they gave us
0:15an easy answer to very complex issues
0:18our brain is evolutionarily hardwired to
0:20believe those stories it's always easier
0:22to have someone or something to blame
0:24than actually looking for the truth and
0:26searching for the rational and logical
0:28truth is always a much harder and
0:30complex task for our mind to do rather
0:33than what it's often presented in these
0:35cheap YouTube theories which mostly
0:37leverage emotion instead and if it's
0:39true that in the day-to-day trading
0:40activity we shouldn't let emotions get
0:42in the way of our trades I think we
0:44should do exactly the same in the way we
0:45try to comprehend the very complex
0:48nature of financial markets so over the
0:50last year I've been thoroughly studying
0:52this topic of stop hunting and for a
0:54long time I could only find or come up
0:56with purely abductive and specious
0:58explanations like H there could be stop
1:01orders up there so they want to take
1:03those stops to induce traders to buy and
1:04close their sell position so they can
1:06take liquidity to fuel the next move
1:09whatever that means but this very
1:10simplistic answer only rose up more
1:13questions first of all who is they who
1:15is pushing the price up to catch some
1:18stops is it more banks are they
1:19collaborating or are they fighting each
1:21other because they're competitors or are
1:23they hedge funds who is actually smart
1:25money participants in detail and are
1:27those stops actually retail Traders
1:29stop- losses cuz retail trading activity
1:31only accounts for 5% of the total daily
1:34volume and are we considering retail
1:36stop orders on the underlying asset or
1:39also the stops on Futures and options
1:41and cfds a huge Bunch if not the
1:43majority of retail traders in the world
1:45today are using cfts and 90% of those
1:48stop losses are not even in the
1:49interbank market cuz they're trading
1:51against their Brokers so they don't
1:52bring any concrete Edge or benefit to
1:55the smart money participants but whoever
1:57is making this move how do they know if
1:59there is actually stops there or how
2:01many there are do they have access to
2:03secret data or is it just because there
2:05is a previous high so they guess there's
2:07going to be stops out there how do they
2:09know it's worth to push and push and
2:12push price up by moving millions and
2:14millions and millions of dollars just to
2:16go up there and catch a bunch of little
2:19retail Traders stop losses that they are
2:21not even sure are there I just couldn't
2:22wrap my mind around all this so in order
2:24to get a deeper and data-backed
2:27understanding of this concept that
2:28Richard wov used to call spring or up
2:30thrust what later in the orderflow space
2:32was known as a failed auction or a stop
2:35run to what now today is being called
2:37inducement liquidity grab Judah swing
2:39and a bunch of other fancy terms in
2:41order to understand all this I had to
2:43see those stops being triggered I had to
2:46see those orders and the only way to see
2:48order flow is with order flow so I
2:51bought a data feed a platform and
2:53started seeing actual order flow in
2:54action every single day and after
2:56hundreds and hundreds of stop runs I
2:58finally understood what is is really
3:00going on behind those moves and the
3:02answer is going to shock you and in
3:03order to understand it you have to
3:05understand how real orderflow works
3:08because yes you can call this a bullish
3:09price action or bullish order flow but
3:11that's just bullish price action this is
3:13actual bullish order flow and yes you
3:15can call this an order block without
3:17seeing any actual blocks of orders or
3:19you can use real order flow instead and
3:21see actual blocks of orders fair value
3:24gaps are determined by price and volume
3:26which is order flow but you're just
3:27using price action when orderflow data
3:29can give you a way more accurate and
3:31reliable visualization of the imbalances
3:33in Fair Value in this channel I try to
3:35debunk some of these myths with data
3:37backed information through orderflow so
3:39if you want to know a more accurate
3:41version of Market mechanics instead of
3:43there is an algorithm which was given to
3:45me by God then you might want to
3:46subscribe to the channel let's start
3:47with understanding how orderflow works
3:49so probably you've been told that
3:51there's two forces in the market buyers
3:53and sellers and while this is absolutely
3:55true this is only a partial view of the
3:57market because both buyers and sellers
3:59can be aggressive buyers or Sellers and
4:01passive buyers or sellers these are
4:03passive buyers and passive sellers these
4:05are sell limits and buy limits per every
4:08level of price there are orders that are
4:11put there and they are the menu of the
4:13market they are the catalog of the
4:15market I've been explaining this
4:16thoroughly in all of the previous videos
4:18of this orderflow course that you can
4:20find Down Below in the description so
4:21these are resting orders orders that are
4:24waiting to be filled by aggressive
4:27orders so this is passive then there is
4:29aggressive orders or aggressive
4:30liquidity so say someone comes and want
4:32to buy Market at the best price five
4:35contracts he will buy five contracts at
4:38the best ask price so if say five
4:40contracts here that's where he will buy
4:42those five contracts and that's how
4:44through matching algorithms which are
4:46simply algorithms that match supply and
4:48demand inside of an exchange which for
4:51most Futures Contract is the CME the
4:53Chicago mertile Exchange so once these
4:55five are taken they're taken away from
4:57the order book and this level becomes
4:59empty so so now this is the best bid
5:01this is the best ask and there is a
5:02little spread over here but sooner
5:04enough this level will repopulate
5:06whether with sell orders or buy orders
5:09and if a new buyer kicks in and wants to
5:11buy five more contracts he will have to
5:13buy them at the next level and say here
5:15there's 10 contracts five of them will
5:18be executed so now there's going to be
5:19only five contracts over here and this
5:21little bar will be a bit shorter so
5:23passive liquidity or resting liquidity
5:27also known as market makers they are
5:29providing liquidity these are the
5:31liquidity providers aggressive orders
5:34AKA people buying market and selling
5:36Market are the consumers of liquidity so
5:39price moves wherever the last aggressive
5:42orders has consumed passive liquidity so
5:45if we had to draw a candle this would be
5:47our candle we started here this was the
5:49first transaction the second transaction
5:51is here this is a long candle a bullish
5:53candle and this is basic Market
5:55mechanics now let's say we have the high
5:57of the day above here price has been
5:59[ __ ] around a little bit and now
6:00price is just about to break through
6:03this high and this high so the theory
6:06behind stop runs is above all of these
6:09highs so-called buy side liquidity or
6:13some buy stop liquidity I wouldn't call
6:16it buy side liquidity because Above This
6:19price there is yes buy stops of people
6:22who maybe are selling here with a stop
6:24above here or simply of initiative
6:27buyers which wants to buy the Breakout
6:29to take profit higher so yes there is
6:31actually buy stop liquidity but not only
6:34buy side liquidity in every level of
6:36price there is both sides of the
6:38liquidity otherwise there would be no
6:40Market Market is made Always by both Sid
6:43so there's not just buy side liquidity
6:45and sell side liquidity there is buy
6:47stop liquidity and also sell limit
6:49liquidity so if it's true that there are
6:52buy stops here and buy stops here we
6:54have no way to accurately assess
6:58beforehand how many tops are going to be
7:00there because the only information that
7:02the order book can give us which is the
7:04only kind of reliable information that
7:07we can have in the markets because it's
7:08super manipulated but this is the only
7:10thing which can give us a fair degree of
7:13certainty that an order is there at a
7:15specific moment it's not going to 100%
7:17stay there forever because all of these
7:19by limits can be withdrawn and can be
7:21cancelled okay so we don't know if
7:23they're going to be there but less than
7:24less we can be sure that there's buy
7:26stops there we can deduce that probably
7:28they are there but for normal retails we
7:30can't know if there's actually buy stops
7:32there most likely they will but even if
7:34they are they can't be seen and since we
7:36have to rationally understand this and
7:39until proven guilty no one else can see
7:41these buy stops except for Brokers so
7:43since buy stops and sell stop are not in
7:46the upper part of the order book they
7:48are not limit orders they are stop
7:50orders and they are buy orders above the
7:53current price they are actually Market
7:55orders so you place a buy stop order in
7:58your brokerage account account and the
8:00broker will execute that buy stop market
8:02okay this is really important he will
8:04execute it Market at the best ask if
8:07it's a buy stop or at the best bid if
8:09it's a sell stop so buy stops are Market
8:12orders and they will be executed at the
8:14best possible price where there is at
8:17least one contract as a counterparty so
8:20say that we have 20 contracts as stop
8:23contracts above here and 100 contracts
8:26stop contracts Above This level let's
8:28say it's a total of 100 12 contracts
8:30that are going to be executed in the
8:32next candle these contracts will be
8:35executed Market at the best price so
8:37five will be executed here maybe seven
8:40will be executed here another 10 will be
8:42executed here another I don't know five
8:44will be executed here 20 more will be
8:46executed here and so on and so forth so
8:49the candle in a matter of millisecond is
8:52going to sweep the book that's why this
8:55Dynamic is called also book sweeping so
8:58actually the liquidity sweep it's not a
9:01sweep of stop- loss because stop- loss
9:04are the ones which are sweeping the book
9:07so in a stop run the liquidity which is
9:09being swept or sweeped is sell limits
9:12all right I'm sure 90% of you thought
9:14that liquidity sweep was stops being
9:15swept but for Market mechanics stops are
9:18the one sweeping not the one being swept
9:20by definition so in our footprint candle
9:22there's probably going to be five of
9:24these order here those seven order that
9:26were here are going to disappear and
9:28placed over here those 10 orders here
9:30are going to disappear and get here five
9:32more orders that were here are going to
9:34disappear and get here and 20 orders
9:36that were here will disappear and get
9:38here and all the rest of the contracts
9:4025 30 47 and so on and so forth they
9:44will be gradually executed at higher and
9:47higher prices because that's where the
9:49the best level of the order book Ask
9:52level will be and usually in a low
9:53liquidity environment you will see 0 0 0
9:570 0 0 0 so all this part will be colored
10:01green in your footprint chart most of
10:03the times there is still going to be
10:05some level of activity above here but a
10:07smaller percentage of contracts anyways
10:10because hft are really fast because
10:12there's a high percentage of hft
10:14activity in the market so there's still
10:16going to be some level of orders
10:18executed here but the ask side of the
10:21footprint is going to be way more
10:24voluptuous than the bid part of the
10:26footprint and since ask lifted minus bid
10:29hit is our Delta the Delta of this
10:31candle is going to be really high at
10:33least above 25% so most of the contracts
10:36is going to be aggressive orders cuz
10:38this is a spread this is the best bid
10:40this is the best ask so since most
10:42markets are very liquid especially the
10:44S&P 500 very quickly these levels will
10:48be repopulated by market makers but it's
10:50highly probable that there's not going
10:52to be a lot of them because it takes
10:54some time so the first thing that will
10:55happen is that price is going to go
10:57through the path of list resistance and
10:59get back feeling this level and at this
11:01point is where things start to get a
11:04little bit messy because while there is
11:05a 60 to 70% chance that this will happen
11:08the chance of this happening are
11:11actually not that high and trust me I've
11:13been studying this pattern for the last
11:142 years but one thing that will probably
11:16happen is that we reabsorb the candle
11:18and then maybe we can invert but
11:20sometimes these aggressions will win
11:23let's say and Market will keep buying
11:25let's see some real example now this is
11:26a stop run that you can go and verify
11:28yourself if happened the 29th of April
11:32around 4:00 a.m. on the es contract
11:34let's make the numbers a little bit
11:36bigger so as you can see all this part
11:38of the candle is completely green with
11:40Delta which means aggression and also
11:42absorption the Delta of the candle is
11:44really high almost above 40% and as you
11:47can see there were a bunch of highs
11:49above here and most of all there was a
11:51previous day high above here but as you
11:54can see there is not as many buy stops
11:56as you would expect probably there's
11:57going to be 200 contra contracts which
11:59are sitting right above this High which
12:02is the high of a whole session so there
12:04should be a bunch of them up there but
12:05instead there is very few of them 900
12:08contracts that is not a lot my friends
12:10so the first question we're starting to
12:12ask is it worth it to move all the
12:15contract that has been moved in the long
12:17part in this move up just to take this
12:20miserable amount of contracts I highly
12:23doubt so so let's take the heat map and
12:25take that 46.5 level which is this one
12:28so right above this High we would expect
12:30stops to being triggered and also above
12:33these highs over
12:34here there you
12:36go so if we zoom in this is what
12:39actually happened during the stop run
12:41stops were triggered above all these
12:43highs and they completely deleted all of
12:45this liquidity and now all this part is
12:47black except for these two levels but if
12:49Market was to you know go and hunt for
12:51liquidity there's a much higher
12:53liquidity above here that wasn't even
12:55get close to and these as we discussed
12:57are sell limits then if we open this
12:59indicator which is basically a stop run
13:01indicator is going to tell us with even
13:03more accuracy and Confirmation by using
13:05tape speed and MBO data if those were
13:08actually stop orders now let's take this
13:09other session as an example after a
13:11bullish day we've Consolidated here for
13:13the whole session New York open there
13:15was a news release and right at the
13:17opening of the cash session we are going
13:19right below every single low of the
13:22session to fuel the next move up and if
13:24we look down here yes there has been a
13:26very strong aggressive sell selling move
13:29a fairly high amount of orders being
13:31exchanged down here but always remember
13:34if you think that smart money or
13:35institutions are buying here and retails
13:38are selling let's sum up all the volumes
13:40here so below here 50,000 contracts were
13:44executed which means 50,000 sell
13:47contracts but also 50,000 buy contracts
13:50because every single one of the
13:51contracts that you see here are
13:53contracts being exchanged so for every
13:55single contract there's both buyers and
13:58sellers so there is no way to accurately
14:00assess if these were retails but let me
14:02tell you 50,000 es contract is not
14:05retails what's happening below this low
14:08is a war between much bigger fishes and
14:11eventually someone will win that war so
14:14saying that they went above here to
14:16induce and went below here to induce is
14:20a little bit pretest tuous this was not
14:22a stop hunt or a stop run this was
14:25something completely different cuz as we
14:26said a stop run is purely stops being
14:29triggered and hitting the bid or hitting
14:30the as but this candle over here has a
14:33177% Delta yes there is more aggression
14:35but there's a huge level of buy activity
14:38also on this side of the candle this
14:40other move down which was allegedly
14:43taking stops below here which were very
14:45few has a 2% and 5% Delta which means
14:48that they are really balanced candles
14:50also on the aggression side of things
14:53now this is another similar situation
14:55where we're in an uptrend this is our
14:56demand Zone this is technically liquid
14:59as we've seen liquidity is a much
15:00broader concept than sell stops so let's
15:02see below here what actually happened
15:04price broke below these lows and below
15:07here something extremely interesting
15:10started happening can you notice
15:12something weird let me show it to you
15:14this level is not normal this level is
15:16also not normal there is
15:1926,000 contracts plus 699 plus 1. 2,000
15:24contracts all executed at one level this
15:27is what we call an iceberg order we've
15:29explained it in the previous videos and
15:30this Iceberg order specifically is a
15:32sell Iceberg orders there is no [ __ ]
15:35way in this [ __ ] world that 5,000
15:38retails decide altogether to sell limit
15:41at the same exact [ __ ] tick this is
15:44institutional activity this was one of
15:47the big players in this market that was
15:49trying to block all the buyers and sell
15:52the [ __ ] out of them hoping to go low or
15:54taking profit from a long position and
15:57at the same time this is also be other
15:59huge Market participants buying into
16:01that level this is not stop orders of
16:04retail Traders being triggered this is
16:07numbers this is undeniable whoever
16:10thinks that this activity is retail
16:12Traders is completely fooling himself
16:15complete and utter [ __ ] the real war
16:17is happening between big Market
16:20participants then as I said so yes this
16:22is an absorption there's actually a lot
16:24of volume going on down here also
16:26because of the sell pressure so yes some
16:28retail might be also here but only 5% of
16:31the activity are retail Traders if we
16:33take the commitment of Traders report
16:35and look for the E mini S&P 500
16:38contracts which is the one we're talking
16:39about here we will see that in the last
16:41period which is mainly bearish in the
16:43S&P 500 more than 40% of the shorts are
16:46held by eight or less participants so I
16:49would say that the 20 or 30 biggest
16:52participants are moving 90% of the
16:55volume retail Traders are just a very
16:57small fraction and if you consider in
16:59the coot data non- reportables to be
17:01retails remember that in the Es non-
17:04reportables are positioned below 1,000
17:06contract so calling a retail someone
17:08that moves 999 contracts of the S&P 500
17:11takes balls so actual retails maybe move
17:15510 contracts on the S&P 500 which means
17:18that all of the 50,000 contract that
17:20were executed here maybe 2.5 were actual
17:23retails so there is no way they moved
17:25throughout all of these prices not
17:28knowing that there's going to be an
17:29iceberg order here blocking them on the
17:31way up so my question to you is do you
17:33really think that and by they I mean
17:35eight or less Traders were sitting at a
17:37table together deciding every single day
17:40while being competitors that they were
17:42going to go down here to catch some
17:44retail Trader stop losses I mean do you
17:46really believe that are you that stupid
17:48because if you believe that numbers are
17:49saying something else Market mechanics
17:52are much more complex than that now
17:54since this misconception is mostly
17:56around the ICT space or they say that
17:58markets are rigged and that Banks hunts
18:00for your stop losses even though I
18:02highly appreciate the whole ICT method
18:04because it can be because even though I
18:06mostly disagree with some of the things
18:08he says some things instead are fairly
18:10accurate some other things though like
18:12banks are hunting for retails are
18:13completely out of this world and know
18:15there's no algorithm ruling in the
18:16markets which is actually this video
18:18Let's actually hear it from his words
18:20look at
18:21that his stops is above here you guys
18:23are following my stops you guys are
18:25following my stops remember I was saying
18:27in the first few minutes of the stream
18:29if everybody goes to the same place at
18:31the same Corner that's where the driveby
18:33is going to
18:34happen I was telling my private students
18:36that this is an interesting observation
18:38because if I place my sty publicly and
18:40people are going to be following me in a
18:42large degree that's creating an
18:44engineering liquidity so he's saying
18:46that the 15,000 people that were
18:48watching this live stream placed their
18:50stop loss around the same place 17
18:5366550 NASDAQ won't drop S&P dropped D
18:57dropped there should stop you don't
18:58think these markets are
19:00rigged yeah and he says don't you think
19:03these markets are rigged I'm sorry guys
19:04but I strongly disagree let's actually
19:06take the mini NASDAQ and go back to
19:09January 24 at New York open so let's put
19:11oursel in 30 seconds so there was
19:13supposed to be buy side liquidity Here
19:15Sell side liquidity below here and his
19:17stop loss was right above this candle
19:19over here exactly at
19:211766 550 now we rolled over that
19:24contract so we don't have the exact
19:26prices but it would probably be
19:28somewhere around here and apparently
19:29even in a higher time frame there's no
19:31sign of those 15,000 stop- loss only
19:342.4k contracts were executed here but
19:37one other thing that we're not
19:38considering here is that most of the ICT
19:40followers are trading cfds so when they
19:42take their stop loss most likely the
19:44counterparty to that stop loss is their
19:46broker or their prop firms so there is
19:48no way in this world they moved all of
19:52these billions of dollars to catch some
19:54stop- loss that apparently weren't even
19:55there and shouldn't they take them to
19:57fuel a move down then why the move went
20:00up I ask and why didn't they catch all
20:03the stop loss below these equal lows see
20:05Market mechanics are way more
20:06complicated than that if believing
20:08otherwise makes you more confident in
20:10your Edge throw this video to the bin
20:12because if a particular strategy works
20:14for you you should keep going for it bro
20:16but if you're actually looking to truly
20:18understand the market I will never get
20:19tired to say that market are much more
20:21beautifully complex that Banks hunting
20:23for retails now this video has been long
20:25already so I will make a second video
20:27around different kinds of fake outs how
20:29do they work with orderflow and how to
20:31use my stoer indicator so if you want to
20:33follow up on that subscribe to the
20:34channel

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