Does market/price manipulation exist in Forex Trading? Is it possible to manipulate prices and players on the market? - the shocking answer is YES!!!
In-depth experience in the market has shown that not all "technical hitches" that caused a strange and sudden change in price occurred due to technical reasons. The sad part of this is that many victims were not aware that they were right in the middle of a "sinister controlled price environment" which led to significant losses.
Forex manipulators are individuals or entities that engage in fraudulent or deceptive activities in the foreign exchange (Forex) market to manipulate prices, deceive traders, or gain an unfair advantage. Apart from price maneuvers, manipulation in Forex Trading comes in different forms such as fraudulent brokers, signal providers, or trading schemes designed to deceive traders.
Common Forms of Forex Manipulation:
- Price Manipulation Forex manipulators may engage in spoofing-like practices where they place large orders with the intention of canceling them before execution. This can create artificial price movements and trick other traders into making unwise decisions. This is mostly seen in scenarios where price suddenly pushes up or down swiftly in most cases to the right direction and then suddenly reverses to the opposite direction taking out stop loss positions
- Currency Spread Manipulation This is often common during times of low liquidity and during high impact economic news. Manipulators might widen spreads significantly leading to unfavorable entry and exit points for traders. This can result in traders paying higher costs and suffering losses.
- Stop Hunting This is quite an experience with beginners in Forex trading whom are mostly retail traders. Manipulators may intentionally trigger stop-loss orders placed by retail traders. This happens often by pushing prices to specific levels where many traders have their stop-loss orders, they can cause these orders to execute and accelerate price movements in their favor. Experienced traders sometimes use mental stop loss which is quite a risky approach to prevent stop hunting by brokers.
- Front Running This is the subtle meaning of the term "counter-trading" often stated by Brokers in their terms and conditions. Some manipulators, often brokers or trading firms, may execute orders on their behalf or their clients' orders ahead of their customers' orders, taking advantage of the price movement they anticipate will occur due to the customer orders.
- Hoax & False InformationDisseminating false or misleading information about a currency pair, economic events, or geopolitical developments can manipulate traders' perceptions and cause them to make poor trading decisions.
- Fake Signals & Price AnalysisForex manipulators may create fake trading signals, technical analysis, or research reports to entice traders into making trades that benefit the manipulator's position. This is strange but very true.
Six (6) Ways to Protect Yourself Against Manipulations in Forex Trading
There is no full-proof guarantee against Forex manipulations. However, the following measures below has been proven to work for most traders.
- Trade with a Reliable & Reputable BrokerThe easiest way to get ripped off without knowing it, is through "rogue" brokers. It's a known fact that some mischievous brokers perform dubious counter trades ("hedged") against their customers. There are cases of price tinkering under the guise of liquidity hitches, spread manipulations, e.t.c. Select a broker that is regulated by a recognized authority and has a good reputation in the industry. And if possible trade with ECN, & STP broker types.
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- Review Your Trading StrategyBe cautious of trading strategies that may easily expose you to fall victim to market manipulations. Very short-term trading strategies and scalping strategies are more likely to be affected from market manipulations compared to long term trading strategies. Breakout strategies are also susceptible and very predictable as well. Economic news trading is one common area where market manipulators prey on unsuspecting victims who are not well skilled in the art of trading economic news release. Use stop-loss orders, trailing stops, diversify your trades, and avoid risking more than you can afford to lose.
- Avoid Trading During Extreme Volatility & Low Liquidity PeriodsExtreme volatile market unfortunately is a "catching-ground" for market manipulators. This period involves wild price swings, which gives opportunity for mischievous liquidity providers and rogue brokers to manipulate price feed unknowing to unsuspecting traders. The unfortunate technical term used in disguise by rogue players is the word "slippage". If you experience unexplainable and frequent slippages during these periods then it's time to consider changing your broker.
- Report Suspicious ActivityReport every anomaly, suspicious price movements, trading platform glitches/hitches and anything unusual to your Broker. This keeps them in check. However, before doing this, ensure you take pictures and logs of the incident where relevant from at least two (2) different trading platforms to enable you make a strong case. You can also report your observations to renowned Forex forums like forexpeacearmy.com. In some cases, you will discover that you're not the only one experiencing those issues with your broker or provider.
- Be Cautious of Vague & Bogus Account Types & SchemesAvoid "mouth watering" and unrealistic offers promising extreme returns in profits over a period of time. Schemes of this sort are becoming rampant with many unsuspecting traders falling victims. Be wary of bogus account types especially the types that are "free" from trading limitations, leverage, e.t.c.
- Utilize Very Sound Technical & Fundamental AnalysisVery sound technical & fundamental analysis on the market brings a lot of useful information that will essentially help you to take the right decisions, get the right perception of the market's psychology and remove ambiguities. Intelligent and smart market analysis can reveal when market manipulators are at work. For instance, if an instrument e.g Gold (XAUUSD) is appreciating on all fronts, and virtually all indicators are pointing at the same upward direction with the backing of a positive economic event (all things equal) and the price chart displays otherwise, it will be wise to stay out of the market due to signs of anomaly or likely "manipulation"
Remember that while Forex manipulation can occur, it is not pervasive in the market. Most traders and brokers operate ethically. By being cautious and informed, you can reduce the risk of falling victim to manipulative practices in the Forex market.
Happy Trading ....
