If you’re looking into the Forex Market, you’ll want to know if there’s manipulation happening or not. While it isn’t exactly easy to manipulate the market, it can still happen. There are four things you’ll want to know!
Forex Markets are manipulated, although it takes many traders to impact supply and demand for any asset artificially. Manipulators often target newer, smaller traders, who may not know they’ve bet in the wrong direction. Plus, as a 24-hour market, you may not notice the manipulation.
Overall, there are four essential things to know about Forex Market manipulation. I made sure to include everything you should keep your eyes out for in this article. If you do notice market manipulation, make sure to steer clear of it since it’s illegal.
Things To Know About Forex Market Manipulation
It’s not easy to manipulate the foreign exchange market, but that doesn’t mean it can’t happen.
Professionals keep track of the number of assets being bought and sold through snapshots, which often occur during the day. If the number of foreign exchanges doesn’t add up, this could indicate market manipulation.
Market manipulation occurs when a trader places their order at a low price, knowing that there’ll be an “event” or manipulated spike in price later on that day. When the event occurs, the trader can sell for a significant profit.
Manipulators use supply and demand to achieve this. However, there are some signs you can look out for, so let’s take a closer look at them.
1. The Bear Raid
Bear raids are when short selling occurs, lowering the price of the Forex assets. Manipulators often spread bad advice and lies and then profit by causing other traders to sell early or short their assets.
Keep in mind that many people will sell when a company isn’t doing well, but this isn’t a bear raid.
According to Investopedia, bear raids involve rumors of negative (often untrue) information about the assets to deceive traders. You can tell a raid happens when conflicting information on social media paints the market in a bad light. Always make sure to conduct your research.
2. Signs of Wash Trading
Wash trading also relies on tricking traders. The manipulators make the assets appear much more popular than they are to gather more attention. However, they buy and sell without any losses.
Many traders even create multiple accounts and trade between them without making profits.
This process results in the stock appearing very active to outsiders. When others join in, they often take the loss. The manipulators can have many different goals for attracting attention to the currencies as well.
To determine if wash trading is happening, make sure to check the net gains and losses. If there’s a lot of trading but no profits anywhere, it’s not an asset you want to involve yourself with!
3. Forex Scams
You’ll also want to stay far away from Forex scams and report them if you do find them. You should only ever work with regulated brokers. They can be regulated by the NFA, CFTC, or by their country’s government.
Going with non-regulated brokers means you could lose your money.
Scammers may try to manipulate the market using various methods, including computer programs. If a broker limits how much you can withdraw from your accounts, you could be involved in a scam.
Always be skeptical of emails you receive that talk about miracle assets, which are trades that seem to offer impossible gains on the Forex Market. Many of these sketchy emails involve manipulators looking to sell their assets and increase the demand for better prices.
In short, you must research everything before you commit to a Forex trade. You don’t want to lose your money!
4. Front Running
Finally, banks can become involved in front running, which is when they use private data from their clients to earn profits from the Forex Market. The bank or broker sees your order, then places their own first to get the most profits. They go back and file yours later.
When this happens, you get the worse position while your broker profits. Watch this short YouTube video explains the process:
To summarize, while it’s difficult to manipulate the Forex Market, it’s always a possibility. You’ll want to watch out for the above signs. That way, you don’t get caught in the losing end of a manipulated event.
Overall, it would be best if you always researched the trades you want to make. When you do, you can better protect yourself and your money.
- GibbsLawGroup: Market Manipulation
- Investopedia: Bear Raid Definition
- Investopedia: Wash Trading Definition