In simple terms
Stop hunt is the informal name for a quick move beyond a level where many traders may have placed stop orders. The stops trigger, price accelerates, and sometimes returns immediately to the previous area.
The observable fact is the price sequence. The actual location of stops and the intent of market participants usually cannot be inferred from a simple chart.
What happens to the orders
In many markets, once its trigger price is reached, a stop becomes a market order; the final execution price may therefore differ from the trigger. Trigger rules and handling depend on the broker, venue, and instrument. A brief volatile move can activate a stop even when price later recovers.
In trading language, liquidity grab is broader: it may refer to several forms of executable interest, not stops alone.
Limit
“Stop hunt” is not an automatic diagnosis of abuse. Authorities have documented cases in which intent to move price and trigger stops was established, but that requires order, conduct, and intent evidence. A spike and return are not enough.
Sources
- FINRA, Stop Orders: Factors to Consider During Volatile Markets — explains triggering, execution-price risk, and how a brief move may activate a stop before price recovers.
- Investor.gov, Stop, Stop-Limit, and Trailing Stop Orders — clarifies that trigger standards, trigger price, and execution price may differ.
- CFTC, Former Trader David Liew Engaged in Spoofing and Manipulation — documents a case in which intent to trigger stop-loss orders was established through investigation, not inferred from a chart alone.