Yes, Forex brokers can manipulate the prices shown on their own trading platforms.
Manipulation can occur in a variety of ways, degrees and contexts. However, it is important to note that most of the top regulated Fx brokers do not engage in such things.
Forex brokers are actually CFD providers, hence Market Makers, and this means that they have total control over everything that is shown to traders, and the trades that are executed.
Despite these premises, Forex regulations impose a certain type of behaviour on brokers, and they monitor these activities to ensure the safest possible environment for retail traders.
Do Forex brokers manipulate prices?
Yes, there are cases of Forex brokers that have manipulated or still manipulate prices in Forex. The main fraudulent manipulations are carried out by unregulated brokers.
When it comes to regulated and reputable Fx brokers, traders very often mistake ‘manipulations’ for normal market inefficiencies such as execution delays, slippage or requotes.
Some inefficiency in the execution of orders is natural and physiological in the Forex market, especially during times of high volatility. Clearly, it is not normal when these inefficiencies persist over time and are always at the trader’s disadvantage.
Which type of Forex broker manipulates prices the most?
Unregulated Market Maker brokers are the type of broker that is most prone to price manipulation. Market Maker brokers act as counterparties to traders’ trades, and when traders lose, they gain. But likewise, when traders win, they lose.
For this reason, an unregulated market maker is more likely to manipulate prices and order execution to its own advantage in order to interfere with a trader’s potential winnings (which is one of the most common types of Forex scams).
That said, other types of Forex brokers are not exempt from suspicion, because in any case, a Forex broker has total control over what is shown to traders.
However, when it comes to regulated brokers, especially by Tier 1 regulations, then the risks drop dramatically.
How do Forex brokers manipulate prices?
Following is a list of the various methods used by some Forex brokers (especially unregulated ones) to alter prices and trade executions, and in general to penalise users’ trading activity to their advantage.
Sudden price spikes
“Sudden price spikes” refer to abrupt and often unexplained sharp movements in currency prices that can occur within a very short time frame. While these can happen due to legitimate market factors, they can also be artificially created by unscrupulous brokers for manipulative purposes.
For example, consider a scenario where a trader notices that a currency pair, such as EUR/USD, is trading within a stable range. Suddenly, without any apparent economic news or market event to justify it, there is a sharp spike in the price, moving significantly against the trader’s position, triggering stop loss orders or margin calls. Soon after, the price returns to its previous range as if the spike never happened.
Abnormal spreads
“Abnormal spreads” refer to unusually wide differences between the bid (buy) and ask (sell) prices of a currency pair, beyond what would be expected under normal market conditions. While spreads can naturally fluctuate based on market liquidity and volatility, abnormal spreads can also be artificially created or exaggerated by some brokers for manipulative purposes.
For instance, under normal conditions, the spread for a popular currency pair like EUR/USD might be 2 pips (percentage in points). However, a trader might occasionally find that the spread has inexplicably widened to 10 pips or more without any significant news or market events to justify such a change. This abnormal widening can make trading costlier and more challenging, as entering and exiting positions becomes more expensive.
In a manipulative context, a broker might widen spreads to increase their own profits, especially during times when traders are likely to enter or exit trades, such as around major economic announcements or market openings. This can result in traders paying much more for their trades, reducing their potential profits or increasing their losses.
Delayed order execution
“Delayed order execution” refers to a situation where there is an unnecessary or intentional delay in executing a trader’s order by a broker. While some delays can occur due to technical issues or high market volatility, deliberate delays can be a form of manipulation.
For example, a trader attempts to execute a trade at a specific price point, but the broker intentionally delays processing the order. By the time the order is executed, the market has moved, and the trade is executed at a less favourable price. In a manipulative context, brokers might use delayed executions during periods of market volatility to benefit from the price changes occurring during the delay, often to the detriment of the trader. This practice can lead to significant disadvantages for traders, especially those relying on timely executions for their trading strategies.
Rigged pricing onto the platform
“Rigged pricing onto the platform” refers to the manipulation of price feeds by a broker to display rates on their trading platform that do not accurately reflect the real market prices. This can be done to mislead traders about market conditions or to trigger trades at disadvantageous prices.
Traders, relying on this false information, might make trade decisions that they wouldn’t have made if the real market data were presented. This could lead to the trader entering or exiting positions at non-optimal prices, potentially resulting in unnecessary losses or missed profits.
Stop loss hunting
Stop loss hunting can be viewed from two perspectives: as a legitimate strategy used by large market participants and as a potential manipulation tactic by Forex brokers.
When large institutional traders or big players engage in stop loss hunting, they are essentially seeking out areas where a significant number of stop loss orders are likely to be placed. These traders might execute large orders in a way that moves the market price to these levels, triggering the stop loss orders. This movement can create a temporary additional momentum in the market, allowing the big players to benefit from the resulting price movement.
However, in the context of potential manipulation by brokers, stop loss hunting can involve artificially creating conditions that trigger clients’ stop loss orders. This is often achieved through spread widening, where a broker temporarily increases the spread between the bid and ask price. For example, a broker might widen the spread on a currency pair just enough to hit the stop loss levels of several clients, even if the actual market price is stable and not near those levels. This can lead to the closure of clients’ positions at a loss, while the market price itself might not have reached these levels under normal spread conditions.
Slippage
Slippage refers to the difference between the expected price of a trade and the price at which the trade is actually executed. While slippage can occur naturally in fast-moving markets or during periods of high volatility, it can also be used manipulatively by unscrupulous brokers.
For example, a trader places an order to buy EUR/USD at a quoted price of 1.2000. However, due to slippage, the order is executed at 1.2005, meaning the trader pays more than expected. In a manipulative context, a broker might deliberately delay executing a client’s order, allowing for more significant slippage to occur, especially in volatile market conditions. This can result in the broker profiting from the worse execution price at the expense of the client.
Requotes
“Requotes” in Forex trading occur when a broker is unable to execute a trade at the requested price and offers the trader a new price for the trade. While requotes can happen legitimately in fast-moving or thin markets, they can also be used manipulatively by some brokers.
For instance, a trader attempts to buy a currency pair at a specific price. However, instead of executing the order, the broker sends back a requote, offering to execute the trade at a less favourable price. In a manipulative context, a broker might frequently issue requotes to avoid filling orders at prices that are disadvantageous to them but favourable to the trader, especially in situations where the market moves in the trader’s favour after the order is placed. This can result in traders missing out on advantageous market conditions or entering trades at less favourable prices.
Spoofing
Spoofing refers to a manipulative practice where a trader, often a broker, places a large number of orders and then cancels them before execution. This is done to create a false impression of demand or supply in the market, misleading other traders about the true price direction.
For example, a Forex broker might place a substantial order to sell a currency pair like GBP/USD, giving the illusion of an impending downward price movement. Other traders, perceiving this large sell order, might start selling GBP/USD too, driving the price down. However, before the broker’s large sell order is executed, they cancel it and instead buy GBP/USD at the now lower price. This allows the broker to profit from the artificially created price movement, while other traders who were misled by the spoofing activity may incur losses.
Front-running
Front-running refers to the unethical and often illegal practice where a broker, with advanced knowledge of a large client order, executes orders on their own account ahead of the client’s order. This is done to profit from the expected market movement that the client’s order will cause.
For example, imagine a Forex broker knows that a major client is about to buy a large amount of USD/EUR. Anticipating that this order will increase the value of USD against EUR, the broker buys USD/EUR for their own account before executing the client’s order. When the client’s order is placed, the value of USD increases as expected, allowing the broker to sell their earlier purchased USD/EUR at a profit. This practice is considered unethical because the broker is taking advantage of privileged information at the expense of their client.
How can I know if my broker is manipulating prices?
To check and find out whether your Forex broker manipulates prices, you can do some checking.
Specifically, you can:
- Check the pricing policy
- Check requote and slippage
- Check historical data
Check the pricing policy
Asking your Forex broker about their pricing policy is an important step in ensuring fair and transparent trading practices. A transparent broker should be willing and able to provide detailed information about how they set their prices.
If a broker is transparent, they will typically provide clear and comprehensive information about their pricing policy, often readily available on their website or through direct communication. They should be able to explain the mechanics behind their price quotations, how they manage volatility and liquidity risks, and their policies on slippage and requotes. This level of openness is a good indicator of the broker’s reliability and commitment to fair trading practices.
On the other hand, if a broker is evasive, provides incomplete information, or is unable to satisfactorily explain their pricing policy, it could be a warning sign of potential malpractice.
Check your requotes and slippage
If you consistently experience negative requotes and slippage when trading with a Forex broker, it could be a sign of price manipulation. While requotes and slippage can happen in fast-moving markets or during periods of high volatility, they should theoretically be both positive and negative, reflecting the natural ebb and flow of market prices.
However, if you notice that they are almost always negative — meaning the new price is less favourable than your original order — it raises a red flag. This pattern might suggest that the broker is selectively delaying or manipulating order execution to provide requotes that are advantageous to them but detrimental to you.
Check the historical data
To ascertain whether your Forex broker might be manipulating prices, you can compare the historical price data they provide with that from independent third-party sources.
You can use websites such as:
- Investing.com
- TradingView
These external platforms offer unbiased market data, and comparing their historical prices with those offered by your broker can help you identify any discrepancies or irregularities.
If the price data from your broker consistently deviates from that of these third-party sources, especially during key trading periods or around major economic events, it could indicate potential price manipulation. Such discrepancies might manifest as different highs, lows, or closing prices for the same time frames. While slight differences can occur due to the decentralised nature of the Forex market, substantial or consistent mismatches are a cause for concern.
Can brokers manipulate their own trading platform?
Yes, brokers can manipulate their own trading platform, although it’s important to note that reputable regulated brokers typically do not engage in such practices.
However, having total control over the platform can obviously allow for unfair and manipulative practices, such as sudden malfunctions at key moments of trading activity.
Can brokers manipulate third-party trading platforms?
Brokers cannot directly manipulate third-party platforms, however, they have complete control over the price stream that is shown to traders via the platform.
Therefore, a broker with a third-party platform is no guarantee of security.
How can I avoid Forex brokers that manipulate prices?
The most important thing to do to avoid Fx brokers that manipulate prices is to choose a regulated broker.
Choosing regulated Forex brokers means choosing a broker that has decided to submit to certain rules and has agreed to be monitored in its conduct.
The more authoritative the regulation to which the broker is subject, the more unlikely cases of manipulation are, although it is important to note that a regulated broker is not synonymous with absolute security.
Why is regulation important when considering price manipulation?
Regulation is crucial in the Forex market regarding price manipulation, because regulatory bodies establish and enforce rules designed to prevent malpractices and ensure fair trading conditions.
One of the key aspects of these regulations is the principle of Treating Customers Fairly (TCF). Under TCF, brokers are required to uphold the interests of their clients and ensure fair treatment. This includes:
- providing transparent pricing
- executing orders fairly and promptly
- ensuring that any information provided to traders is accurate and not misleading.
By signing agreements to abide by these principles, brokers commit to maintaining a high standard of conduct.
Regulatory bodies actively monitor brokers to ensure compliance with these rules. They have the power to impose penalties, revoke licenses, and take other actions against brokers who violate these standards.
Therefore, the most important thing you can do to increase the security of your trading activity is to check if the Forex broker is regulated.
How do I check if the broker has manipulated prices in the past?
To check if a broker has a history of manipulating prices, you can refer to the websites of regulatory bodies, such as the Financial Conduct Authority (FCA) in the UK.
These regulatory authorities keep records of any sanctions, fines, or disciplinary actions they have taken against brokers. These records are usually accessible to the public and can provide valuable insights into a broker’s past conduct.
Are there online resources to check Forex brokers’ reliability?
Yes, there are several online resources available to check the reliability of Forex brokers. User feedback websites like Trustpilot offer a platform where individuals can share their personal experiences with various brokers. These reviews can provide insights into the broker’s customer service, reliability, and overall trading experience.
However, it’s important to approach these reviews critically, as they can be subjective and may not always give a complete picture.
Additionally, broker comparison websites, such as InvestinGoal, provide comprehensive analyses and comparisons of different online brokers. These websites often evaluate brokers based on various criteria, reliability being the first of them.
Where can I find trustworthy Forex brokers?
To find trustworthy Forex brokers, one of the best and quickest approaches is to consult reputable broker comparison websites, such as InvestinGoal.
We evaluate retail Forex brokers based on several important criteria, ensuring that they adhere to high standards of reliability and transparency. We often update our reviews and comparisons to reflect any changes in the brokers’ services or regulatory status.
Browse our database of Forex broker rankings to quickly find what you are looking for.
Is it possible for brokers to manipulate the Forex market?
Forex brokers can only manipulate the prices displayed on their own trading platforms; they do not have the capacity for systemic market manipulation, i.e. to manipulate the actual movement of the broader Forex market. It is much easier for a broker to manipulate charts on traders’ screens rather than the entire Forex market.
Brokers can potentially alter the price feeds on their platforms, creating discrepancies between the prices they show to their traders and the real market prices. Such practices, if they occur, are forms of manipulation limited to the broker’s platform and are not reflective of genuine market movements.
Who can manipulate the Forex market?
The movements of the Foreign Exchange market can indeed be influenced, although it’s a challenging and rare occurrence, typically only possible by extremely large players such as major banks or hedge funds.
The vast size and global nature of the Forex market, with its high liquidity, especially in major currency pairs, make it resistant to manipulation by smaller market participants. However, major currency pairs like EUR/USD are less susceptible to manipulation due to the enormous volume of trades that occur with these currencies.
Notwithstanding, there have been instances where large institutional traders and major banks have been involved in manipulating prices. These entities, due to their significant trading volume and influence, can coordinate trading strategies that may temporarily impact market prices.
A notable example occurred in 2015, when major banks, including JPMorgan Chase, Citigroup, Barclays, Royal Bank of Scotland, and UBS, were implicated in a scandal involving the manipulation of Forex prices. They coordinated trading activities and used exclusive chat rooms to manipulate benchmark exchange rates, affecting the EUR/USD pair among others.
These actions led to investigations by regulatory authorities and resulted in hefty fines for the banks involved.
Who decides Forex pairs exchange rate?
Forex pairs exchange rates are not decided by any single entity; instead, they are determined by the forces of supply and demand in the Forex market, influenced by a range of macroeconomic factors.
What are the factors influencing Forex prices?
Forex prices are influenced by various factors, including economic indicators (like GDP, employment data, and inflation rates), central bank policies and interest rate decisions, political events and stability, geopolitical tensions, and global financial market trends.
Additionally, natural disasters, major news events, and shifts in trade relations can also impact currency values. Currency prices are sensitive to these factors as they affect the perceived strength, stability, and future prospects of a nation’s economy, influencing investor confidence and currency demand and supply dynamics.