Decoding Forex Trading Uncertainty: Do Forex Brokers Manipulate the Market?

Yes, Forex brokers can manipulate the market direction in their trading platforms. Unregulated brokers manipulate markets. However, reputable and regulated brokers refrain from manipulating the market even when there are normal inefficiencies such as slippage, delays, or requotes.

How markets are manipulated 

Unregulated forex brokers use varied ways against a retail trader, interpreted as market manipulation. The following is a list of ways unregulated forex brokers manipulate the market;

• Abrupt price spikes
• Order execution delays
• Unusual spreads
• stop-loss hunting.
• Requotes

Abrupt price spikes

Sudden spikes often occur unexplainedly, usually within a very short time. Genuine market forces can cause spikes, but they are also sometimes manufactured by unregulated brokers to manipulate the price against retail traders. 

For example, consider a retail trader trading GBP/USD in the direction of the trend. This justifies market manipulation if the market makes an abrupt spike in the opposite direction without any fundamental impact or event. 

Order execution delays

Order execution delay occurs when a broker intentionally delays trader order execution at a specific level identified by a trader. Delays are inevitable due to high market volatility or a technical issue, but intentional or unnecessary delays justify manipulation.  

An example of intentional delay is when a trader spots a particular price point and makes an execution, but the entry is delayed. The order is executed later when the price is less profitable to the trader. 

Unusual spreads

Spreads are unusual when the difference between a currency pair's buy and sell prices is unusually wide beyond regular market rates. Traders understand that price naturally fluctuates from changes in market volatility and liquidity. However, unscrupulous forex brokers can create or exaggerate unusual spreads to the detriment of a retail trader.

For example, under normal circumstances, the GBP/USD currency pair could be known to have a spread of 3 pips. If a trader finds the spread is unusually widened to 11 pips or more, without significant market events of economic news, this amounts to a manipulation of the spread. 

Stop-loss hunting 

There are two ways to stop loss hunting: one is that it is used as an acceptable strategy by big market participants such as banks to change price direction, and the second is that forex brokers manipulate the price. 

Large market players detect where most stop-loss orders are placed and may engage in stop-loss hunting. Large traders may move the price by executing large orders to shift the cost to where most retail traders have positioned their stop losses. 

On the other hand, brokers can manipulate the market by artificially engaging conditions that trigger retail traders' stop-loss orders. This is achieved by artificially widening the range between the ask and bid price to hit the stop-loss level.  

Requotes

Requotes occur when the forex broker fails to execute the trader's requested price and offers another price point instead. They may appear in fast-moving markets, but unscrupulous brokers also manipulate them.

For example, consider a trader attempting to place a buy entry at a specific price point. Instead of executing the trade, the broker offers a different, usually less favourable requote. 

Detecting broker manipulation 

To identify whether your forex broker is manipulating the price, check their historical data, requote, and pricing policy. 

• Brokers' historical data - Checking brokers' historical data will assist you in comparing the price data they share with independent sources such as TradingView. 

• Brokers requote - When you receive negative requotes often from your forex broker, that is a warning sign of market manipulation. While requotes may happen naturally from market events, multiple negative requotes should raise a red flag. 

• Brokers pricing policy - Enquiring about your forex broker pricing policy is a step in detecting unscrupulous brokers. Regulated brokers are transparent and willing to share details about their pricing policy affairs. 

How to identify whether your Broker has a history of price manipulation. 

Check with regulatory bodies such as the Financial Conduct Authority (FCA) to identify whether your forex broker has a record of manipulating prices. Regulatory bodies have accessible records of disciplinary actions or sanctions against unscrupulous brokers.