By Nathan Boardman
Numerous aspects of investing require your attention and meticulousness. Nevertheless, there are particular risks that you might need to learn to manage. Chart manipulation is one of those practices. Here, you can gain insights into the concept and explore strategies to prevent hardship as a result of unscrupulous actions by certain brokers.
Understanding Chart Manipulation
Chart manipulation encompasses various strategies that individuals employ to impact the actions of other investors. The majority of individuals endeavor to manipulate charts with a specific objective: to influence the supply and demand for a particular product. This is common when dealing with currency pairs.
Is It Possible for Brokers to Manipulate Charts?
Indeed, the answer is affirmative, although it can be alarming to hear, particularly for novice investors who may feel uncertain about whom to rely on or what information to trust.
While brokers can manipulate charts, not all of them engage in such practices. Only a handful of individuals partake in these customs.
It is crucial to have a clear understanding of chart manipulation and its mechanics in order to recognize it while making investments, thereby minimizing potential risks.
It’s worth noting that multinational corporations and central banks also impact the Forex market. These establishments engage in extensive buying and selling activities, exerting a significant influence on prices and a currency’s long-term prospects.
Nevertheless, financial institutions and companies strive to promote the welfare of their nation, which stands in stark contrast to the malicious intentions of specific unscrupulous traders who seek to harm individual brokers on occasion.
If a nation’s economy is experiencing a period of volatility, the central bank might engage in foreign exchange transactions, either purchasing or selling currencies through Forex. Nevertheless, even in this situation, it doesn’t necessarily have to impact individuals. In addition, the official institutions that frequently manipulate the charts in their favor do not partake in any unlawful or illicit activities.
Various Ways to Manipulate Charts
As previously stated, it is indeed possible to manipulate charts, and this is a practice that brokers engage in. Here are some popular strategies that individuals often employ to increase their odds of success:
Slippage
Occasionally, market conditions can be unpredictable, resulting in currency prices that may deviate from initial expectations. This gap between currency pairs, known as “slippage,” is a common occurrence experienced by many traders.
There are instances where this can pose a risk, as certain brokers may attribute price discrepancies to slippage, even if they are responsible for causing the gap. Thus, it is advisable to exercise caution if it develops into a recurring occurrence and begins to impact your position.
Spoofing
This approach is illegal and unethical. It involves placing fraudulent orders in a particular currency, which generates a false sense of interest.
As a result, individuals may suffer significant financial losses as those who initiated the orders have no intention of making a purchase.
Due to the surge in demand, the price will experience an artificial increase, attracting a larger number of investors. Nevertheless, the broker will nullify these orders prior to their execution.
Spoofing is a clear violation of the law, resulting in significant legal ramifications. It is a complete modification of the Forex market, and the investors involved may face significant repercussions.
False Spikes
If you are knowledgeable about trading and investing, you are likely familiar with the fact that this market is highly volatile and unpredictable.
Similar to numerous other traders, it’s not unexpected for you to notice a decline in prices, correct?
Unfortunately, unscrupulous brokers exploit this system and create artificial price increases that attract unsuspecting traders.
After buyers have made their purchase, they will notice the price moving in the opposite direction, leading to a substantial loss.
Brokers are only capable of fabricating artificial highs in individual accounts. Thus, one approach to address this issue is to contrast your account with that of others. Additionally, you have the option to utilize the charts offered by external Forex vendors.
Stop Hunting
This is a widely adopted strategy when investing in Forex. Nevertheless, unscrupulous brokers exploit this opportunity and attempt to deceive others into making particular choices that will only serve their interests.
During the practice of stop hunting, brokers direct others to close a particular trade in order to prevent excessive financial losses. Once they come to a halt, they manipulate prices to shift them in the opposite direction.
Cease chasing is a common phenomenon that often takes place during periods of high market volatility. Therefore, it is a habit that you should be cautious of.
Front Running
Unscrupulous brokers also employ front running, a practice that involves closely monitoring another investor’s actions and making decisions more quickly than them.
But, when a broker expresses their intention to execute an order, the other broker promptly executes it ahead of them.
Completing the transaction before the other trader not only distorts the charts but also negatively impacts an individual’s position. Consequently, it may lead to unfavorable consequences for the broker in question.
Valuable Resources and Recommended Techniques to Keep in Mind
While it is true that some brokers engage in unethical practices, there are ways for you to safeguard your positions and increase your chances of achieving your desired outcomes. One approach is to utilize free tools and adopt specific strategies that can help you in this regard.
You have the option to utilize numerous trial accounts and evaluate the different currency conversion rates. As a result, you can steer clear of brokers who participate in stop-hunting.
In addition, you have the option to compare the prices displayed on the company’s terminal with those on Bloomberg and Reuters.
If you search online, you’ll likely come across various free tools that assist you in manipulating charts and achieving your desired outcomes.
Nevertheless, it is advisable to refrain from using them. Otherwise, you risk experiencing unfavorable results or, in the most extreme situation, facing legal complications.
On the contrary, it is absolutely crucial to ensure your safety. To achieve this, it is essential to understand the various tactics employed by unscrupulous brokers and take necessary precautions to steer clear of them. This may involve utilizing multiple accounts or meticulously comparing prices on numerous occasions prior to finalizing a transaction.
Conclusion
There are unscrupulous brokers out there, and unfortunately, you may come across them in this industry. Now that you know of some of their methods, you can employ alternative approaches to safeguard yourself.
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