This is one of my favorite forex trading tips and the basis for much of my trading.
The forex market is driven by a constant quest to run stops. This may be just my opinion but it is as close to fact as I can tell.
I cannot emphasize enough how important this is to understanding how the forex market works.
While I am not privy to the way all of the algos work, I assume some are programmed to be on a seek-and-destroy mission, which is to probe for stops.
I am not talking about your stop but stops in general as they tend to be bunched around the same levels.
Master this concept and it may change the way you look at trading.
The point is once you recognize that the forex market is on a never-ending quest to run stops, you can put the price action in perspective.
Think about it.
If you have a feel for where the market will look to run stops, it can give you a clue which side of the market is more at risk.
This is true across all time frames but especially true for intra-day trading. You do not need an order book to get a sense of where stops may be resting. It is a skill you can develop over time.
When stops are run
When you see a large wick in a candle or an outsized long bar on a chart, more times than not it is caused by a run-through stops.
On the other hand, when you see an obvious level for stops that trades and quickly reverse without a large wick or long bar, it may, and I emphasize the word “may,” indicate either there were no stops or that they were easily absorbed.
When there are no more stops to run
When there are no stops left to run, a currency will either reverse the direction of trade sideways in a narrowing range. This may explain why the market tends to die off during the US afternoon as there are no stops left nearby to go after.
This is not to suggest basing your trading on guessing where stops are resting and hoping that they get triggered.
However, adding this to your trading mix should help you assess the risk and the strong side of the market at any point in time.
ADDENDUM: AUGUST 27, 2025
From my EURUSD post on the Forex Forum on August 26
Currently trapped between 1.1602 (double bottom) and 1.1660 (double top)
If there are key stops to run they would be below 1.1602.
As this chart shows, sell stops were run below 1.1602 and 1.1583, both key levels. Once sell stops were exhausted and the low was in, algos lost interest on that side.
Takeaway:
- Forex market is on a never ending quest to srrk out and run stops
- Given the oipportunity, algos will probe levels to see if there are stops to run
- Side most vulnerabe (on any time frame) is the side where stops are at r.
- Once stops are run and the low (higb) for the day is in, algos will lose interest on that side and market will either go into a range or probe the other side looking for stops the othrt way..
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