Traders Union analysts explained in detail what forex market manipulation is, and how to avoid market manipulators using real examples. There are many ways to manipulate Forex, stock and cryptocurrency markets.
By learning about the most popular types of financial manipulations, you can avoid scams and will be able to make rational market decisions.
What is market manipulation?
Market manipulation is artificial conduct aimed at deceiving investors and affecting the price of assets. In most countries, market manipulation is considered illegal and a prosecutable offence, because it can disrupt the capital flow.
However, it is quite difficult for regulatory authorities to find and punish offenders, who resort to artificially driving the price up for their own benefit. There are many ways to manipulate the market, from falsifying quotes to imitating transactions. Financial fraud is possible in trading any assets (Forex pairs, stocks, commodities, etc.).
Popular ways to manipulate the market
It is important to know the main methods used by scammers to attract investors. This will help you avoid participating in scams and keep your money safe. Traders Union analysts prepared a list of main methods used by market manipulators:
Pump and Dump. This scam involves driving the price of an asset up using false advice. Specifically, spam is used. Potential victims are offered to invest funds in potentially “promising” assets. Investors invest their funds and invite others, artificially raising the price.
Fake news. False information is disseminated about a company to influence potential investors and convince them to make specific decisions. Fake news is mostly harmful to long-term and short-term investors.
Spoofing. Scammers place large orders but don’t intend to execute them. This is done to create a false idea about a large number of buyers/sellers. The scammers are simply after making a profit through market manipulation.
Bear raid. Scammers push the asset’s price lower through short selling. At that, a bear raider receives income from short sales earlier and then starts spreading false information. As a result, other investors lose money, while the manipulator’s profit increases.
Corner a market. In this case, a certain organization tries to gain control over an asset to be able to manipulate its price. As a result, manipulators can dictate conditions to others, as they have control over the asset.
In the analytical article by Traders Union specialists, you can find information about other popular methods of market manipulation and review real examples.
Experts explain why market manipulation is illegal and how to avoid market manipulators.
Specifically, experts recommend traders check sources of information, clearly follow their chosen strategy and not react to sudden price pumps. This will help you reduce the risks of losing money and increase the chances of growing your capital.