Interbank dealers gun for stops but there is also a whole new breed of professional trader who make a livlihood on other people’s misery. This is how it works.

These traders will have very large trading lines with a number of brokers, retail and institutional. They usually have good information on where all the big stops are as they are generally ex-interbank traders with excellent contacts. When they see that stops are about to be triggered, they will hit their brokers with everything they’ve got so they might be selling anything up to $1 billion across about 5 or 7 brokers in a matter of seconds. They like to operate in less-liquid markets as then their chances of triggering the stops and also of getting bigger gaps, are greatly enhanced. The brokers have the option of holding that position but generally they will try and offload immediately, thereby adding to the stop selling panic. As soon as the market gaps lower, the trader will enter the market and try to buy back his shorts for a quick 30 or 40 pip profit.

Obviously the brokers are wary of this type of business but most of the bigger ones will put up with it, though that might be changing.