Today, I delve into a pressing question that echoes in the minds of many—not just anyone, but traders. Forex enthusiasts, retail traders, and those who’ve just embarked on this journey all share a common dilemma. You’ve risked your hard-earned $1,000 in the forex market, wondering if the potential reward justifies the risk.

Perhaps you’re the type of trader who leans heavily on market execution more than the fundamentals. If that sounds like you, you’re in the right place.

Many traders express frustration at being stopped out each time, wondering the cause of the sudden turn of events. Approximately 80% harbor the suspicion that these occurrences aren’t just misfortune but the work of somebody.

Indeed, you’re closer to the truth than you might think. Somebody or rather somebody’s (pun intended) cause Market Manipulation. This sneaky tactic is a big deal for anyone trying to make it in trading.

What is Market Manipulation in Simple Terms?

Let’s split this term into two; ‘Market’ and ‘Manipulation.’ What makes up the ‘Market’? There is you, the retail trader, and then the institutional traders (the banks and large investors).

Think of the market as a farmer’s market: the dynamic interplay of buyers and sellers creates a vibrant trading environment. Some buy a little (like you and me), and some buy a lot (the big institutions).

So, how does market manipulation fit into this picture? Let’s use a familiar scenario to illustrate the holiday shopping rush. We’ve all been there—aiming to beat the holiday price hikes by purchasing gifts early, often setting our sights on getting this done before the end of October.

But what happens when stores, anticipating this trend, hike their prices even before our shopping spree begins? This is a classic example of market manipulation, but it played out on the grand stage of the financial market. It occurs when the major players—the “big institutions”—make strategic moves that catch smaller traders, the “little guys,” by surprise.

“Market Manipulation,” in simpler terms, means the market outsmarts you at your strategy. It’s a game where 20% of the players excel remarkably well.

What’s driving Me to share this?

Many traders have seen their efforts vanish into thin air, prompting a spectrum of opinions about the forex market. On one end, disillusioned voices label trading as nothing more than a gamble or a scam, likening the market to a black hole that sucks hard-earned money.

Conversely, optimistic traders view it as a pulsating field ripe with opportunities for strategic wealth creation and investment. Amidst these contrasting perspectives lies a complex landscape influenced by numerous factors, some within our control and others less so.

This article aims to shed light on one crucial element that often dictates the rhythm of the forex market – a factor that, once understood, could dramatically shift your trading strategy from reactive to proactive.

So, stay tuned whether you’re nursing wounds from past losses or charting your next big trade. You’re about to gain insights that could change not only how you view the market but also how you engage with it.

How to Spot Market Manipulation in the Forex Market

In Forex trading, there are major points of interest, some of which refer to areas of liquidity —these are what we call resistance and support levels. I’m zeroing in on these major levels not by chance but for a compelling reason: they’re where market manipulation often unfolds.

Market Scenario: the market is in an up-trend, and it’s on the brink of hitting a resistance level, possibly even signaling a classic double-top formation. Traders with a foundational understanding of chart patterns are bracing for a potential reversal. Positioned at this formation’s neckline, most traders are placing their sell orders in anticipation.

But here’s where the narrative takes a twist.

The heavyweights of the trading world—those institutional traders—are not here for mere pocket change. Their game is one of the grand strategies, where moves take the queen or ‘check mate.’ This isn’t about collecting coins; it’s about securing the crown.

The other side of the coin

Meanwhile, in this same market, some traders take a different approach, ‘If the market breaks its structure to the upside, it’s signaling a continued uptrend, and that’s my cue to jump in.” Acting on this insight, they strategically place their buy orders, carefully choosing their entry points.

Extra confirmation, like a pullback in the market, should be in every trader’s arsenal; not trading ‘the bounce off’ is a common mistake that leads many traders into trouble.

As these orders fill, the market becomes a whirlpool of activity. Stop-loss runs are taking the stage, and buy orders are triggered. Amidst this, the big institutions step in with a different plan. They issue a hefty sell order, sweeping up the buy orders and tipping the scales. This plays out until the market reaches the take-profit level you had envisioned.

When you find yourself in this situation, hope can be a double-edged sword. The belief that the market will correct itself, only to watch it move further from your prediction, is a common plight. This phenomenon, known as stop hunting, targets major liquidity points, often fuelled by misleading market rumors. It’s a strategic play to meet liquidity needs by forcing the hand of smaller traders.

Your initial analysis might have been correct; the market eventually moves as anticipated. However, the “big boys” have already taken their cut, leaving a trail of losses for smaller traders. This outcome underscores a critical lesson: the importance of strategic patience, especially near significant liquidity zones.

Stay curious, stay cautious, and let every trade teach you something new.