A couple of years ago I wrote a piece on [forex broker price manipulation](/forex-broker-price-manipulation/, and in that article the conclusion arrived was that it would be extremely difficult for forex broker’s to manipulate price as there were just too many variables working against the forex broker.
Some of these being the fact that the manipulating forex broker would need to assume you keep your stop order(s) at the price you’ve set, and no other forex traders taking advantage on the manipulated price.
Now someone added an insightful comment on that article, by stating that my assumption regarding spiking was done on a global basis, which is correct, and would therefore beg the question: can forex brokers manipulate price on an individual basis?
This is definitely a valid point.
Let’s assume that we are trading with a forex broker that has spiked us either into or out of a trade.
How would I be able to prove that the spike occurred on my account only?
Just look at a forex chart, right? Well - which one? You wouldn’t be able to check the chart your forex broker offers as they could very well be providing you with data that shows the spike so you wouldn’t be able to use that as proof.
To prove individual account manipulation you’d need to compare with another forex account with the same broker, or a reliable third party forex chart.
The easiest way in proving forex broker manipulation would be to find someone who had a trade that didn’t get transacted when it should’ve where you did. Using a third party chart as verification doesn’t really offer that much in the way of proof. I mean, everybody knows that all forex charts are different and can vary by as much as 5-10 pips during volatile periods and what would happen if you did find that your broker was manipulating price by using a third party forex data vendor, and your forex broker used another third party forex data vendor proving their case too?
It’s a difficult thing to prove dear friends, and I’m not saying that it doesn’t happen it’s just where does one start when they think they’ve had it happen to them?
And don’t forget one other important aspect dear folks: the forex brokers would need to know what is likely to happen in the future if they are to successfully spike you and take your money. The only time I’d think forex brokers would know of what direction a currency pair is likely to head would be receiving economic information prior to its release - and I do remember reading somewhere that central banks do contact other banks letting them know prior to the announcement what interest rate decisions have been made!
So, in my mind, I’d think that if the central bank is likely to disclose the figures to third parties prior to its announcement, would other organizations do the same? I mean, a human still needs to write up the report do they not? And people talk, do they not? Hmm.
Anyway, I resurrected this topic again after reading through Phil Davis’ The Forex Non-Dealing Desk Trader blog where he provides some insightful commentary on the importance (and differences) between standard dealing desk forex brokers, and a non-dealing desk brokers - with non-dealing desk forex brokers being the preferred.
He also has a forum where forex traders provide stories on their forex trading woes.
Manipulation is a difficult thing to prove, however I don’t doubt that spiking can happen, but it is dependent on the forex brokers clientele and larger forex brokers may have different spikes than others due to the fulfilment of orders.
The only solution to eradicating this problem would be to centralise the forex market at a transparent exchange - and the undertaking of such an endeavour would be momentous to say the least.