Stop hunting is a commonly misunderstood process in the forex markets.  The forex market is the largest and most leveraged market in the world.  Its trading volume in one week is greater than the US stock markets yearly volume.  In forex trading it is critical to use stop loss orders to maintain proper money management.  In equity trading it is possible to buy and hold stocks long, but this does not happen in forex for the majority of investors. 

Stop hunting can be defined as the process of the larger players buying or selling large amounts of currency pairs to trigger the stop loss orders of the weaker smaller players.  While some people would call this unfair, it is the nature of markets.  By understanding this process you can protect yourself from the consequences.  The truth is that everyone knows that markets are volatile and move up and down throughout the trading session, week, and year.  Therefore, it is important to understand that a tight stop loss order will have a very good chance of being taken out the longer it is left in.

The misconception in stop hunting is that the brokers are trying to take out your orders.  It is true that every forex broker has different spreads.  However, it is very arrogant to believe that the broker would go to the effort and risk to move their prices just to trigger your orders.  Further, it does not help the brokers if you lose money.  In fact it hurts them.  The brokers would much rather you be a winning trader so that you can buy larger lots sizes and they can make a larger percentage off  of the spread.

The main thing to understand is that stop hunting is a healthy part of the market.  Even though they are not taking out hard stops in the equity markets, the same happens over there as well.  For instance there will be large move up in a stock to shake out the shorts.  Then there will be big moves down after a nice run up in a stock to get rid of the weak longs.  Even though there are not stops in place being physically taken out psychologically the investors will call their brokers or login to their accounts and place the trade manually.

With this knowledge understand that in the forex market tight stops are not safe and you must take profits quickly.  If you want to be a in a longer trade you must use a healthy stop loss.