deliberately triggering client stop loss orders
Stop loss jamming is a practice when dealers who are aware of their client resting stop losses are deliberately trading in an aggressive way to move the price to trigger the stop losses. Dealers can profit by off-loading position accumulated during aggressive trading to a client while the market price usually reverses to the level before the jamming started. The risk of jamming stop losses is higher for large orders and in less liquid markets, for example, in the context of FX markets, outside the hours of normal high liquidity for a given currency pair.
Effective implementation of surveillance alerts for stop loss jamming requires capturing the following trade data:
trade and position
client stop loss levels and their executions
market prices and volumes