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What’s all this about Bank Manipulation of Forex Prices

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The internet seems to be awash with the latest information and sales messages whose objective is to inform you, the Forex trader why you are still not making money.

The most recent focal point is “Bank Manipulation”. As I work in bank this makes me smile….

Bank Manipulation……….are people crazy ….do these system sellers understand anything about trading??

So apparently according to a lot of people banks, manipulate prices? I mean what do people actually expect banks are going to do with people on the other side of their trades,  as an opponent out on the Forex pitch ? Let them have the ball so that you can score a goal, make a home run or a touch down??

Of course they aren’t, that’s like Manchester United telling Wayne Rooney to give the ball away to the opposing team so that they can score a goal because they feel sorry them. That sort of thing simply doesn’t happen in Forex.

Bank’s are going to use any and every tactic they have available in their arsenal of fire power, the very same tactics they have used for centuries in order to take money out of your pocket and put it in theirs. That shouldn’t be a surprise.

Banks are in the game to make money just like you are, it’s just that they are better resourced and more knowledgeable than most individual traders are and generally they also know how to quickly offset their risk.

Let me repeat, banks are there to make money not be your friend, they bills and wages to pay, they are commercial organizations.

Let’s have a look at some of the latest information about this so called “bank manipulation”.

It works like this, at certain points which are screamingly obvious to anyone who has any chart reading skills there is a lot of two way activity that takes place before price goes on its merry way finding the path of least resistance either upwards or downwards.

Such points are known collectively by traders as “support and resistance” areas amongst others, like round numbers, pivots points, Fib’s etc. Banks or the people who make the markets love these areas for several reasons:

- They can start off loading their positions into the froth and chop that the area provides and where other people are doing likewise and where as a result liquidity is very high. This means that they can get into and out of their positions without putting the price up against themselves by too great an amount.

- Additionally, they are good areas to shake out existing weak holders and spook in new would be longs and shorts, the idea of course will be to shake them out shortly afterwards.
In other words there are runs against stops and limit orders. There is nothing new in the idea that stops or limit orders might be the target of your counterparty’s desires.

You now by now my thoughts regarding the majority of MT4 brokers and whilst yes they will of course ensure that they stretch their prices a few pips more than the market in order to ensure that you either get brought into the market at an unfavorable place or get stopped out of the market at an unfavourable place, they cannot alone influence the whole interbank and get their one second prices printed on any reasonable price feed.

And the big banks? What most people don’t understand is that there is huge competition for the business that in the market and that whilst I am not saying orchestrated price rigging or fixing does not take place, not in the way that most people would think of it, there is indeed an inherent understanding of the price activity that will happen at differing point in the trading day and within each of the four sessions.

An example of this, is that of  course price will be moved towards the limits of a range bound market in order to take the orders that are on the order books, be they stops of limit orders. However what people do not realize is that with automated method of announcing bid/offer, the market willl, all by itself progress towards those points, if that is the place where two way trade is possible. That’s how automated market making systems work.


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