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Can Forex Brokers Manipulate The Market?

Can Brokers Manipulate Charts? FX Practices to Watch Out for

Being an investor means that you have to take care of many details. However, there are specific dangers that you may not be aware of. Unfortunately, chart manipulation is one of them. Here you can understand what it is and discover things you can do to avoid suffering due to some brokers' unethical behavior.

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What Is Chart Manipulation?

Chart manipulation consists of all the practices individuals engage in to influence other investors' behavior.

Most people attempt chart manipulation with a goal in mind: to affect the supply and demand for a specific product. It happens a lot with currency pairs.

Can Brokers Manipulate Charts?

The short answer is "yes," but it's often terrifying to hear, especially if you're a beginner investor since you may not know who to trust or what to believe.

Although brokers can theoretically manipulate charts, not everyone does this. Only a few people engage in these practices.

Therefore, understanding what chart manipulation is and how it happens is essential, as it allows you to identify it when you're investing, helping you avoid some risks.

It's also important to know that multinational corporations and central banks influence the Forex market, too. These institutions buy and sell at a large scale, which heavily impacts prices and the future of a currency.

However, banks and corporations intend to benefit their country, and that's completely different from wanting to harm a specific broker, which is what some unethical traders try to do sometimes.

If a country's economy is going through an unstable moment, the central bank may buy or sell through Forex. However, even in this scenario, it doesn't necessarily have to affect individuals. Moreover, the official institutions that often manipulate the charts in their favor do not engage in unlawful or illegal practices.

Types of Charts Manipulations

As mentioned before, manipulating charts is possible, and this is something that brokers do. The following are the most common practices that people engage in when they want to turn chances in their favor:

Slippage

Sometimes, market conditions are volatile, so the price of a currency could be different from what people thought. The term "slippage” defines this gap between currency pairs, which often happens to many traders.

In some cases, this can be dangerous because some brokers can blame slippage even if the price gap is due to something they did. Therefore, you should be cautious if it becomes a pattern and starts to affect your position.

Spoofing

This strategy is illegal and unlawful, and it consists of placing phony orders in a specific currency, which develops a fake interest.

In consequence, people can lose a lot of money since the ones who placed the orders have no interest in buying.

As a result of increased demand, the price will go through artificial inflation. In turn, this attracts more investors. However, the broker will cancel these orders before their execution.

Spoofing violates the law, so it has legal consequences. It's a direct alteration of the Forex market. Therefore, there could be severe consequences for the investors involved.

False Spikes

If you know about trading and investing, you're probably aware of the fact that this market is very volatile and unpredictable.

Like many other traders, when you see a low spike, it's not a surprise, right?

However, some unethical brokers take advantage of this process and fabricate price surges, which lure unsuspecting traders.

Once buyers place their order, they'll see the price moving the other way, resulting in a significant loss.

Brokers can only manufacture false peaks in individual accounts. Therefore, a way to handle this situation is to compare your account with the one of another people. You can also use the charts that third-party Forex vendors provide.

Stop Hunting

This is a common practice when investing in Forex. However, unethical brokers take advantage of it and try to trick others into making specific decisions that will benefit them.

When doing stop hunting, brokers instruct others to close a specific trade, so they don't lose more money than they can afford. After stopping, they push prices to move them in the other direction.

Stop hunting is something that frequently occurs when the market is extremely volatile. Thus, it's also a practice you should watch out for.

Front Running

Unethical brokers also use front running, which consists of observing the behavior of another investor and making choices faster than them.

In other words, if a broker says they intend to place an order, the other one will immediately place it before them.

Executing the deal ahead of the other trader not only manipulates the charts but also harms an individual's position. Therefore, it can result in negative outcomes for the broker involved.

Free Tools and Offered Practices to Be Aware of

Although there are unethical brokers, you can use free tools and engage in practices that will allow you to protect your positions and have better chances of getting the outcomes you want.

You can use multiple demo accounts and compare exchange rates. Therefore, you can avoid dealing with brokers who engage in stop-hunting.

Additionally, you can compare the prices the company's terminal shows with the ones in Bloomberg and Reuters.

If you look online, you'll probably find free tools that promise to help you manipulate charts and turn things your way.

However, you should not use them. Otherwise, you will be risking getting negative outcomes or, in the worst-case scenario, having legal problems.

Instead, protecting yourself is vital. In order to do so, you have to be aware of the different strategies that unethical brokers use and do what you can to avoid dealing with them, even if it means that you have to use different accounts or compare prices numerous times before closing a deal.

Conclusion

Unethical brokers exist, and you're prone to encounter them if you're in this industry. However, now that you're aware of some of their tactics, you can use different strategies to protect yourself.

You might also be interested in reading the below articles:

FAQs

Can a Broker Manipulate the Market?

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Yes, a broker can manipulate the market by engaging in unethical practices that often harm other traders.

Can a Forex Chart Be Manipulated?

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Unfortunately, yes. Some brokers manipulate charts, for example, to make others believe that a spike is low and trick them into making a purchase.

Who Can Manipulate the Forex Market?

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Central banks, multinational corporations, and brokers all influence the market. However, the first two don't do that with the intent of harming individuals, which is what unethical brokers do.

Can a Broker Manipulate MT4?

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Yes. As with other things in the Forex market, MT4 is prone to manipulation as well. Therefore, traders must be cautious and keep their eyes open.

How Do You Tell if a Broker Is Trading Against You?

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There are different ways to tell if a broker is against you, for example, by comparing the charts and prices with other sources.

Do Brokers Trade Against You?

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Each broker trades for their benefit, so eventually, some of them will be against you. However, there are specific brokers whose sole goal is to take advantage of others and harm them, so these are the people you should watch out for.

How Are Markets Manipulated?

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Brokers and institutions manipulate markets, but they do it differently. The latter focuses on nation-level growth, while the former often wants to harm individuals for their benefit.

Do Brokers Manipulate?

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Yes, many brokers manipulate because they want to achieve their goals no matter what. Also, they don't care about harming others in the process.

DailyForex.com Team
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The DailyForex.com team is comprised of analysts and researchers from around the world who watch the market throughout the day to provide you with unique perspectives and helpful analysis that can help improve your Forex trading.
 

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