A broker that hunts clients stop-losses in an effort to bag a few extra pips is malicious. The practice is discouraged in trading circles and often costs such brokers their clients. Traders need a reliable partner who they can trust since the odds of making a profit rest squarely on the efficiency and transparency of their broker. Institutions that have members of their staff manually adjusting their spreads in an effort to hunt stop-losses of clients should be avoided as it is wrong and will cost them clients. Most brokers do not find the reward of a few pips bagged unfairly to be worth the risk of losing clients.
The practice of stop-loss hunting is not common in regulated brokerage institutions. To avoid falling victim to unfair practices, a trader has to exercise diligence when picking a broker to work with. By choosing a transparent and credible partner, you can be assured as a trader that your open positions are safe from stop-loss hunting. Most regulated brokers keep of this practice, a fact that most traders in denial fail to acknowledge. Losses made from hitting stop loss do not always stem from stop loss hunting.
Brokers have to adjust their spreads every time a major news event prepares for a shift in market sentiments. This is not done with malicious intent but as a precautionary move by brokers to secure their interests. An increase in spreads means traders with tight stop losses are caught up in the jerk reaction to an announcement made in the market. To avoid falling victim to this jerk reaction, traders are advised to give their open positions more breathing space by placing their stop loss a few pips higher or lower than their intended point of exit in the instance the trade does not go their way.
Periods of increased liquidity in the market result in traders incurring higher spreads when opening a position. The spreads might increase with higher liquidity since it will take brokers longer to execute all transactions. This situation in trading can be read as malice by a broker trying to hunt your stop loss. However, it is not an effort by a broker to hunt your stop loss. This is a market condition that has to be anticipated by every trader. To address such an instance, you have to avoid opening a position with a tight stop loss order.