Can Forex Brokers Manipulate Charts?

In today’s lesson, we are going to talk about a very genuine problem that is shared by the majority of traders working in the financial business. This is an example of chart manipulation. When a broker manipulates the prices shown on market charts in order to meet their own requirements and disrupt the efforts of their clients to make lucrative trades, this is known as chart manipulation. Learn more about whether or not forex brokers actually engage in this activity in the next section:

Is Chart Manipulation Possible

Certain forex brokers have the power to exert some kind of control over the market’s pricing. It is possible that dealing-desk brokers who also function as market makers will come to the realization that they do not charge traders sufficient commissions and will, as a result, provide them with varying quotations. This scenario could play out because dealing-desk brokers also operate as market makers.

In addition to this, they are able to concoct false price rises in order to convince investors to purchase specific currency pairs. This is done in order to make more money. Because the currency market does not have a central exchange, Forex brokers are able to produce and quote rates regardless of the other players in the market.

As a consequence of this, retail dealers may discover that the pricing offered by several platforms is drastically distinct from one another. As a direct result of the lack of stringent restrictions, dishonest brokers have been given a chance to engage in fraudulent activities. This opportunity was made possible by the lack of strict laws.

Is Chart Manipulation Common

It should come as no surprise that not all brokers participate in questionable practices like manipulating pricing or the market. On the other hand, in tandem with the growth of electronic and internet-based trading platforms, there has been an increase in the number of fraudulent activities. One great way of avoiding fraudulent activity is by not utilizing the chart at all. You can do this by instead using forex signals provided to you by expert analysts.

Even though the foreign exchange market isn’t subject to the same level of stringent regulation as other markets, there are still regulations in place that forex brokers must adhere to in order to avoid engaging in fraudulent behavior. In order to ensure that the brokerage you choose to work with is reliable and trustworthy, you need to undertake extensive research on their past before making a final decision.

Avoid using dealing-desk brokers as much as possible since they frequently trade against their customers and may engage in a variety of different methods of price manipulation in order to maximize their own profits. They will not send your orders to the interbank market because you will be dealing directly with them.

How Brokers Manipulate Charts

There are a few distinct approaches that brokers may use in order to influence the prices that are displayed on the market charts. The following is a list of the most popular methods:

Front Running

Brokers using what they know about the behavior of their clients is an example of another unethical approach to manipulating the market. This practice is known as “front running.” The broker will quickly put their own order in front of the customer if the customer signals that they want to make an order. 

This allows the broker to profit from any changes in price that may occur. The price will fall as a response to the broker selling the pair. It completes the transaction before its customer, who was holding out for a price that was a little bit higher, giving it the opportunity to profit from the situation.

Stop Hunting

Dishonest brokers may also employ a strategy known as “stop-hunting” to influence the value of underlying assets in the market. Forex traders utilize a strategy called stop-loss orders, which is a kind of risk management, to cut down on the amount of money they are in danger of losing.

They instruct their brokers to end the deal as soon as it reaches a certain price point so that they do not sustain a monetary loss in the process. It is something that happens very frequently in the foreign exchange market. While the vast majority of customers believe that this strategy is not being used for any harmful reason, unscrupulous brokers may use it to their advantage.

They raise the prices to a place that is near to the stop-loss order, which compels you to get out of the trade before the loss is fully realized. After that, they moved the prices to the position that they had been in before, which was the reverse of where they were. 

The stop-loss orders are moved in one of two directions by the broker, who sends the prices either slightly higher or slightly lower than the values that are actually found on the market. Utilizing a number of different demo accounts may help you avoid engaging in stop-hunting.

Spoofing

Spoofing is a form of market manipulation that is both unethical and illegal. When brokers, market makers, or other major market players participate in spoofing, they are participating in illegal and unethical market manipulation. It consists of establishing a false interest in a currency pair by placing bogus orders on them without the actual aim of trading that currency in the future. This may be accomplished by using a strategy known as “fake interest.”

Doing so will cause an artificial inflation in the price of the pair as a consequence of increased demand, which in turn will attract a significant number of traders. After these traders have placed their orders, the broker will then cancel them before they are carried out. To impersonate another person is a criminal offence that has the potential for legal repercussions. Simply because they have changed their minds about anything does not rule out the possibility of their cancelling the orders.

False Spikes

The foreign exchange market is characterized by high levels of price volatility, with many price movements taking place even within the course of a single trading day. As a consequence of this, traders are used to seeing high and low spikes, and a sizeable proportion of them make money by trading these spikes. 

Unethical brokers make use of this feature by inventing price spikes in order to deceive traders into placing orders with them when they have no need to do so. You will see that the price goes in the other direction as soon as the order is made, which will cause you to sustain a substantial loss as a result. It’s feasible for brokers to create fake peaks in charts for individual accounts using their own personal data.

In light of this, the one and the only way to prove the presence of false spikes is to compare the trading account you use with the trading account of another trader who uses the same brokerage. You might also make use of the charts that are provided by a forex broker that is independent of you.

Slippage

When there is a great deal of uncertainty surrounding the market, it is likely that the real price of a pair will end up being much different from what was predicted. This gap is referred to as slippage, and it is something that commonly takes place for many different traders.

In the event that you are unable to have trust in your broker, there is a chance that they may manipulate prices and attribute any swings to slippage. If this is the case, they will compel you to pay a larger amount by stating that significant volatility was the cause of the price rise. This will be done in order to get more money out of you.

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