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#1 17-05-2021 11:19:10

johnedward
Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3176
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What you need to know about forex price manipulation

What you need to know about forex price manipulation


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While many stock traders who switched to forex trading assume that currencies behave the same way, this is far from the truth. First of all, currencies, unlike stocks, flee from any influx of money. If you look at any currency pair in the chart, you will see that the price always ends up going in the opposite direction to where most traders are. This happens because the currency market depends on the flow of money like the stock market.

The currency market is only governed by large institutions that make profits when traders lose. They always step in when they see that most traders will give up in order to make more money. This often happens with reversal traders, as they are so determined to speculate against the trend that the banks push the price into the trend. However, the price will not move until most traders give up. This is the essential mechanism of how prices change in this market - through manipulation by the big banks. This is why it is absolutely necessary that you build your trading system and not do what the majority do. Of course, this article is just an observation.

Can we beat the big banks?

Our short answer is no. You can't and you shouldn't even try because it's pointless. Many traders have already tried to do this by acquiring volume information. They thought that the DOM indicator, for example, could tell them how to play the game like the big banks. Unfortunately, they did not understand the volume figures. The DOM indicator will never tell you anything about the type of orders that make up the volume, whether they are limit orders or stop orders, or whether the majority of them are entering long or short trades at that time. Not only is the missing information crucial, but this approach will inevitably put you in the loser's circle.

Most traders have tried to do exactly what the big banks do, which is why so many traders lose most of their trades and thus their capital. The role of the big banks has always been clear and trying to outsmart the one entity that has more information than anyone else in the forex market at any given time is a sure way to suffer big losses. Therefore, to beat the game, you need to learn how to use and interpret the information you get to rise above their radar and focus your attention elsewhere.

Are there any indicators that traders should not use?

Spot forex as we know it was created in 1997. Decades later, we have thousands of indicators at our disposal. Interestingly, we are still using tools that were either designed specifically for stock trading or are so old and outdated that their use makes no sense. Let's see which ones made it into our list of worst indicators (you might be surprised).

The ADX (average directional index) is still quite popular. It is also worth mentioning that it was created in 1979 and is so outdated that it can barely do what it is supposed to do: measure volume.

Trend lines are also one of the most used tools by traders today. However, because different traders can draw different trend lines, the variations can be so drastic that no consensus can be reached. This approach leaves too much room for error, not least because most trends are over by the time we discover them.

Stochastic oscillators date back to 70 years ago. It is interesting to note that even stock traders, for whom this indicator was originally designed, avoid using it. Most of the signals are wrong and traders can hardly follow trends because of inaccurate information.

Price levels may not be an indicator in themselves, but they still attract a lot of attention. Traders seem to believe that there is something more to this game than trading round numbers, but they don't see how many options this concept provides. Price levels won't be able to tell you where the price will go, but they often attract the interest of the big banks.

Lastly, the Commodity Channel Index (CCI) developed in 1979 is not the best choice, as it will probably force you to make a move too soon.

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