Can Brokers Manipulate Charts?

Brokers do have the ability to manipulate charts, but you don't have to be suspicious all the time since it depends on the type of brokers you trade with.

Today we're going to be discussing a very real concern that most traders have in the financial industry. And this is chart manipulation. This is when the broker changes the prices on the market charts to suit their own needs and prevent the clients from making profitable trades. Find out below if you suspect your brokers manipulate the chart.

There are certain forex brokers who have the ability to influence prices. It's possible to point it out to dealing-desk brokers since they operate as market makers and don't charge traders sufficient commissions; they will instead provide varying quotations.

Additionally, they are able to manufacture phony price increases in order to persuade investors into purchasing certain currency pairings. Forex brokers are able to generate and quote rates regardless of other participants because there is no central exchange for the currency market.

Because of this, retail traders might find prices that are significantly different from other platforms. Untrustworthy brokers have also been given the opportunity to engage in fraudulent operations as a direct result of the lack of strict regulations.

Types of Chart Manipulations

There are a couple of different ways brokers use to manipulate the prices on the market charts. The most common methods are as follows:

Slippage

When market conditions are volatile, it's possible that the actual price of a pair will be different from what was anticipated. Slippage refers to this gap, which is something that frequently occurs for many traders.

This is prone to manipulation because brokers can just blame slippage when the price gap is actually something that they did. You should be cautious if the slippage happens very frequently and ends up negative most of (if not all) the time.

Spoofing

When brokers, market makers, or other big market players engage in spoofing, they are performing some sort of market manipulation that is unethical and unlawful. It consists of developing a fake interest in a currency pair by placing phony orders on them without the actual purpose of trading that currency in the future. This is due to the fact that brokers and traders are permitted to cancel orders at any moment and for any reason. It is possible that they will cancel the orders just because they have altered their opinion.

By doing so, the price of the pair will undergo artificial inflation as a result of increased demand, which will attract a large number of traders. The orders that these traders put in are then canceled by the broker before they are executed. Spoofing is a violation of the law and can result in legal consequences.

False Spikes

Forex is a very volatile market with several price shifts occurring even within the span of a single trading day. Consequently, traders are accustomed to witnessing high and low spikes, and a significant number of them profit from trading these spikes. Unethical brokers make use of this feature by fabricating price surges in order to trick unsuspecting traders into placing orders. As soon as the order is placed, you will see that the price moves in the other way, forcing them to suffer a significant loss.

It's possible for brokers to manufacture false peaks in charts for individual accounts. Therefore, the only method to demonstrate the existence of phony spikes is to compare the account you use for trading with the account of another trader who uses the same brokerage. You might also utilize the charts that are given by a third-party forex vendor.

Stop Hunting

Stop hunting is another method that dishonest brokers use to manipulate prices in the marketplace. It all comes from stop loss orders used as a risk management approach to reduce the amount of money they stand to lose.

By using the feature, they instruct their brokers to close their trade once it hits a certain price point so that they do not lose more than what they can afford. It takes place rather regularly in the forex market, and although the majority of traders feel that it would be highly safe, unethical brokers may take advantage of it.

They bring the prices to a point close to the stop loss order that forces you to exit the trade, after which they push the prices to move in the opposite direction. Stop loss hunting is something that frequently takes place during periods of extreme volatility.

You may steer clear of stop hunting by making use of less obvious stop targets or avoid any major news announcement altogether.

Front Running

Another unethical method of manipulating the market, known as front running, involves brokers taking advantage of what they know about the behavior of their clients. When a trader indicates that they intend to make an order, the broker immediately places their own order to profit from any changes in pricing. For instance, a long position from the trader would be a signal for the broker to sell which will result in a decrease in price. It executes the deal ahead of its trader, who was waiting to execute it at a price that was a little bit higher.

Do All Brokers Manipulate Charts?

The frequency of fraudulent operations has increased alongside the development of electronic and internet-based trading platforms. But the good news is, not all brokers engage in activities such as manipulating prices or the market.

Even though the forex market isn't as heavily regulated as other markets, there are still restrictions in place that prevent forex brokers from engaging in fraudulent activity. So, before deciding on a brokerage, you must first conduct thorough research into their history to guarantee that they are dependable and trustworthy.

Avoid using dealing-desk brokers since they often trade against their clients and may engage in various types of price manipulation in order to increase their own profits. You may trade against them or they will not submit your orders to the interbank market. As a result, ECN brokers can be a much safer alternative to avoid chart manipulations.