Is There Any Way The Forex Market Can Be Manipulated?


Is There Any Way The ForexMarket Can Be Manipulated?

Let’s face it. The Forex market is a risky endeavor to try your hands at. However, the general belief that people have when it comes to the FX world is that with a daily trade of over 5 trillion dollars in currency, the marketplace is free from all sorts of manipulation.

This preconceived notion was torn to bits when several reputable banks, including Barclays, HSBC, Citigroup, RBS, JPMorgan, UBS AG and the Bank of America were involved in price rigging during December of 2007 to January of 2013. If you’re looking to make it big in the FX market, perhaps the best course of action you’d want to take is about all the vulnerabilities existing in the market. With that being said, this article will try to answer all the burning questions you might be harboring about price manipulation and the impact it might have on you.

Brokers manipulating the market:

If you’re a fresh trader looking to break into the market, you need to be careful about who you decide to invest your money with. For a Forex trader, all of their hopes lie in the hands of the Forex broker. The Forex broker then has the responsibility to take up the role of a market maker, and offer a competitive bid/ask quote. One of the most telling signs of a shady broker is that they create artificial spikes, which results in financial losses for the trader investing money. To a trader, this situation would seem as though competitors orchestrated it in the FX market. This type of manipulation is quite prevalent in the FX market since a trader is utterly dependent on a broker for accurate price feeds.

The next step for a scam broker after providing their clients with tampered price feeds is to stop hunting. The brokers will need to tune their software to create spikes, which ultimately renders the traders out of any business. Shady brokers often use price tampering and manipulation to rip off from trusted traders.

Central banks manipulating the market:

As a general rule of thumb, the exchange rate of a country depicts the economic stability of the country accurately. Most investors across the globe prefer to invest in countries with a stable exchange rate. However, owing to an inadequate assessment made by the country’s central bank, the exchange rate becomes too weak or strong for the investors. A robust economy leads to a trade deficit, whereas a weak economy results in hyperinflation.

Banks manipulate the Forex market by usually increasing or decreasing the interest rates to attract investors from the FX world. If increasing or decreasing the exchange rate doesn’t work, central banks will often resort to intervening in the market to bring the currency exchange rate at the desired level. The Swiss National bank is one such example of a bank who manipulated the currency to attract global investors.

So, where do you go from here?

At the end of the article, if you’re a newbie in the Forex world, you might be a little scared by the power that a shady broker and central banks have over the currency exchange. However, the adequate solution to both of these problems is selecting a Forex broker with caution. Make sure that you’ve done the proper research needed before you go investing thousands of dollars with a broker. For the most recent statistics in the news about the FX world, browse through, and you’re good to go!

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