In the financial market, market manipulation may not be as common a term as you might think. But nevertheless, we see it every day, often without our knowledge. So, what actually is Forex market manipulation, how does it affect the traders, and what is the manipulator’s aim for doing this? We will cover everything in this post.
What is market manipulation?
Market manipulation is the act of manually attempting increase or decrease in the price of a security, generally for short term. Most of the times, the manipulation is going to show its effects for a short period of time, though, in some cases, a small manipulation in the candlestick patterns can affect the security for long term, even up to an year.
People usually think market manipulation to affect assets such as commodities, stocks and Forex. Also, manipulation sometimes affects the Forex market for an extended period of time, which is quite rare in stock market. But its effect is not limited to that. It can even affect the overnight interest rates, resulting in traders losing or making millions of dollars. In fact, this kind of manipulation sometimes requires the central bank or other government bodies to come into action.
How market manipulation affects Forex?
There are many ways and sectors, how, and up to what extent manipulation can affect the Forex market. Generally, the manipulator’s aim is to create a trend by themselves with the help of candlestick patterns.
Manipulators often create an “Engulfing Candle” during the last few seconds of a one hour candle. This change occurs suddenly and against the flow of events. This change can change the rest of the day, the week, or even the entire month. And, you might have noticed the same happening with 5 minute patterns. These small artificial changes in the Forex charts have the potential to completely divert the trend of a currency, even lasting years.
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Ok. Now, the most intensive questions out of all:
Who are the Forex manipulators?
-In most of the cases, the one who manipulates the currency market is not one person. It’s a group of individuals with high-resources being able to change the market at their will. Sometimes, the manipulator can be government bodies themselves, trying to make an increase in the value of their own currencies.
What do they want?
-They might have different intentions. Some manipulators do it to create a long term trend and benefit from that. Some are Hired “Men-In-Black”, who are paid to destroy the trend and fill the chart with “False signals”. And if the Government themselves are involved in this, they are trying to increase the value of their currency against the other currencies.
How to know when The Forex market is being manipulated?
Therefore, this is quite simple. Just keep looking at the chart of one of the major Forex pairs. Mostly, you will notice by the movement of the market itself, whether or not they are manipulating it. In most of the cases, market manipulations occur at the end of 5-Minute, 30-Minute or 1-Hour Candles, as these are the easiest ones to manipulate. Plus, rather than manipulating the one day chart(Which is not possible for them), they artificially create patterns in 30-Minute or 1-hour candles, which is indirectly, yet certainly going to affect the “Day candle” and further. So, it’s best to completely avoid signals if you sense any signs of Forex Market Manipulation.