I will explain to you the method used by market makers to deceive traders using stop-loss in a precise and simple way, with an illustrative example.
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1️⃣ The Trap Idea (Stop Hunt)
Market makers know where most traders place their stop-loss, especially at:
Famous support and resistance levels.
Recent peaks and troughs.
Psychological levels (like 1.2000 in currencies, or $100 in stocks).
What they do:
They suddenly move the price to reach these levels.
Then, stop-loss is activated for small traders, and their positions are closed.
This creates significant liquidity they can use to enter their large orders at a better price.
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2️⃣ Practical Example
Imagine you bought a currency at a price of $10, and most people placed stop-loss at $9.
1. Market makers suddenly lower the price to $8.95 → your stop-loss and others' is activated.
2. After closing small positions, the price quickly rises to $10.5 → market makers take profits, and you lose part of your capital.
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3️⃣ Important Notes
This happens a lot in cryptocurrencies and small-cap stocks with lower liquidity.
New traders are often more susceptible to the trap due to placing stop-loss at very clear levels.
It is better to use a trailing stop-loss or leave a safety margin from strong support/resistance to avoid the trap.
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Aviso Legal: inclui opiniões de terceiros. Não se trata de aconselhamento financeiro. Poderá incluir conteúdos patrocinados.Consulta os Termos e Condições.
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