Forex spread manipulation

This trick is to make sure that the clients' trading positions are quickly hit by stop loss when the market price moves against their orders. When the price moves up to 1. Say the initial spread costs 2 pips, there are only 3 pips left before the order hits the stop loss. In a situation like this, a stop loss hunter will widen the spread from 2 pips to 5 pips, so that the short position is closed with a stop loss.

Forex broker cheat like this is difficult to identify because most traders will think that they are the ones who miscalculate the price movement. Although they claim to be able to transfer orders directly to liquidity providers, not all brokers of this category apply the provider's original spreads. As a matter of fact, some of them want to earn a bigger income and end up marking up the spread. How do you find out if your broker likes to mark up the spread?

Believe it or not, you can ask the broker directly. The normal spread in the market is usually very low. Here is an example of a case that retail traders often talk about. Slippage is the execution of an order at the price that was not ordered. This condition can occur when the market is very active due to a surge in volatility. The process does run automatically, but obviously, it takes time because of latency the time interval in which data is transferred from the client to the liquidity provider server.

When the market is very active, price volatility will increase rapidly, so it's no wonder that orders can be executed at a different level from the price you ordered previously. In this case, slippage is reasonable. But it can be modified into a forex broker cheat, especially when the slippage frequently occurs when the price movement is relatively steady.

This way, slippage can be one of the ways for scheming brokes to take a lot of advantage from clients' losses. But after clicking the buy button, the order is executed at the level of 1. If the price then goes up to 1. But if the price goes down, for example to 1. Take a note that we haven't included the spread fee yet. Requote is a delay in trade execution, wherein the broker will offer you a new less profitable quote so that you can continue the entry.

This forex broker cheat usually aims to prevent traders from reaping profits from a position that goes well with the current price trend. For example, when prices are falling sharply, you decide to step in with a sell entry. This winning scenario will be prevented by delaying the order's execution.

In replace, the broker will offer a different price requote in which your sell order can be executed, only after the price has dropped to a lower level when the bearish momentum is about to run out. You will find it difficult to get the maximum profit if the broker frequently requotes you. A swap is a commission you have to pay when you have an overnight position. The fee is calculated from the difference between the interest rates of a currency pair.

In general, the swap can vary between brokers. If the comparison is not too drastic, then it can be concluded that your broker doesn't manipulate the swap rates. However, if it is too extreme, this could be a sign that your broker is taking too much profit from overnight positions. Long-term traders who usually leave their positions open for days are obviously the most affected, especially if the applied swap rates are not in favor with their orders.

Initially, leverage was considered to be a powerful feature, able to support a trader to take a trade size larger than his capital strength.

But this facility can also leave an account vulnerable to margin calls when overused. When a market maker offers a leverage of up to thousands and even reaches , instead of helping you, it may plunge your trading account to a very quick loss. The broker type that is most likely to apply high leverage options is the market maker one.

How so?

A spread in forex refers to the difference between the bid and ask price of a currency pair. The difference is also called bid-ask-spread.

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The spread is the cost of each transaction that the forex broker charges and is the basic compensation for each broker. Vice versa, the spread represents the cost to the trader. Basically, a spread represents the supply and demand for currencies. The bid price reflects the demand, while the ask price reflects the supply. A currency pair is when the value of one currency is quoted against another currency. The first listed currency of a currency pair is called the base currency and the second currency is called the quote or counter currency.

The quotation indicates how much of the quote currency is needed to purchase one unit of the base currency. For example: If it takes ZAR The spread is usually measured in pips , the most basic unit of measure in forex trading. Most currency pairs are quoted to the fourth decimal place. A pip represents the last of those four numbers and thus equals 0. Calculation example: In a currency pair the EUR, the base currency, has a bid price of 1. The spread is 1. Forex spread is a valuable concept to learn when you start off as a forex trader because it determines future costs you will have to face as a trader.

A trader that trades with low spreads will have less operating cost and long-term savings. A high spread trader will have to generate higher profits to offset the cost. For many traders, the spread is particularly important within their losses and gains. You must factor in the spread to your potential profit outcome before you trade.

For example, if a trade will cost you 5 pips then you have to cover 5 pips minimum before you can make a profit. In fact, a spread is a direct initial loss for the trader and the strategy should be to cover the loss during the following trading. The spread for one lot, in this case, is 5 pips.

To recoup the loss, you want the subsequent currency pair quote to change in your favour by at least 5 pips. By calculating the forex spread you can determine if the cost is appropriate for your trading style and if you have proper trading strategies in place. Forex spread is also one of the most important things to check when deciding on a forex broker. On certain occasions, there are unscrupulous brokers who exercise this practice to obtain more profits. Higher than normal spreads are normally indications of high volatility or low liquidity in the market.

Take-profits are common among many types of traders to get out of a trade when an instrument hits a certain price level. For example, value investors will sell stocks when they believe it has hit a price that represents its fundamental or fair value.

This would effectively put you on the same side as the promoter. Larger stocks can be manipulated higher as well. Sometimes even those with tens or hundreds of billions of dollars in market capitalization.

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This can be due to prominent investors stating their opinions publicly or due to insiders making new information public. These matters are all subject to securities law, no matter what capitalization the company is. Pump and dump schemes of any size are illegal. Those who intentionally spread false information, or induce others to trade on false information, are committing securities fraud. The most famous example of securities fraud was a contrived buyout offer for Tesla on August 7, But it faded after the market grew skeptical of the possibility given the size of it, the extreme valuation for a company with poor financial metrics, a very limited number of market players who could realistically take it on, and any threat a leverage buyout would do to its already tenuous cash flow position i.

Eventually Musk and the SEC settled the charges for a fine, his stepping down as chairman for a period of time but keeping the CEO role , appointing new independent board members, and having a certain level of oversight of each tweet he sends out. Those of influence within the investment community have the ability to move financial markets through their words and sometimes through filings e.

It could include a popular investment manager commenting on a particular stock, industry or asset class, or a piece of information in a widely circulated publication like the Wall Street Journal or Financial Times. Popular institutional investment managers, promoters discussed in preceding section , and media publications depending on their level of trust can influence news and information streams about various companies.