FX Price Manipulation and Stop Runs
How the rigging in the Forex market works
Inducing of Buying and Selling pressure to target Stop and Limit order zones
The forex market manipulator induces price pressure (buying or selling pressure) to target the stop loss and limit order zone of the mainstream traders to use the market volume of the one-sided order flow at e.g. highs/ lows and striking market price levels to close the accumulated position (accumulated through the induction of buying/ selling pressure to the stop/ limit order zone). Furthermore, when the striking market price level got reached, the FX manipulator also often uses the one-sided order flow/ volume at the mainstream stop/ limit order zone not only to close its position but to accumulate a position against the breakout traders and then pushes market price back, particularly at the first test of a striking market level to catch the stop orders of the fooled breakout traders
With lower prices the stop loss orders of the fooled breakout traders who bought into the failed price breakout to the upside get triggered which might be used by the manipulator to close its position. However, the manipulator often uses the selling pressure of the fooled breakout traders plus if necessary further induced selling pressure to target the next major stop loss order zone of the recent breakout traders and the sell order zone of new breakout traders at for example a recent striking low.
The selling pressure of these stop loss orders as well as the sell orders of new breakout traders during the slight penetration of the striking low shall be enough for the manipulator to close it's short position or even accumulate a new buying position again.
Accumulation and Distribution through the one-sided order flow at breakouts
So, if a striking price level got penetrated the first time then most often market price is not breaking through it with high momentum and a strong market run, although it would have been naturally with the triggering of all the one-sided market stop loss and limit orders. Moreover, market often only slightly penetrates these price levels to trigger most of the market orders before retesting the broken price zone again. The triggering of these market orders are used by the manipulators to either accumulate a trading position against the mainstream trader or to distribute the trading position, which were used to push price to the striking chart level to trigger the market orders of the mainstream traders.
In summary, one-sided volume of stop and limit orders at mainstream Support / Resistance and striking Highs / Lows is targeted by the manipulator to accumulate or to distribute a trading position against the mainstream traders.
Forex Majors and Stops runs
If a trader analyzes the chart patterns and price patterns of the major Forex pairs like the EUR/USD, GBP/USD, EUR/GBP then the trader might come to the conclusion that very often the best prediction of future price action in the Forex market is the direction where most of the stop/ limit orders are located. After these Stop orders got taken out for example with the penetration of an important market high or low, where most of the traders got stopped out and breakout traders got fooled into bad trading setups, market is either turning around to target the opposite important chart level where the stop orders are located or market price only retraces back slightly to catch the stops of some breakout traders with small stop loss orders, - "weak hands" - , before continuing the trend.
Market seldom breaks an important chart level without immediately retesting the broken price zone to catch stops of some breakout traders with "weak hands" and to minimize the chance of a successful breakout trade at an important trading level with only a small stop.
Why Popular Entry and Exit trading signals often fail
In general, obvious price levels and popular price chart patterns are known and visible for all the traders. So, typical entry and exit signals of famous chart patterns or a "clean" break of important chart levels like Highs/ Lows, Pivots, Round Numbers and Necklines would have been good opportunities for chart analysts to make profitable trades. Thus, the trader would easily participate in strong impulsive moves and price momentum when an important chart level would hold or fail to hold as most of the stops and limit orders are positioned around these levels.
However, this is often not the case as it is not in the interest of the market manipulators. The market power of the FX manipulators allows to trigger the stop orders and the limit breakout orders. When the orders got cleared market often reverses. This manipulative market power often prevents market to impulsively break through an important price level when slightly breached. Thus, the manipulator uses the large market volume of the triggering stop and limit orders to position against the mainstream traders as the mainpulator either accumulates or distributes a larger position with the penetration of a striking market level.
Price Retest of important chart levels
Even if the manipulator wants to push price further in one direction of an important high/ low then the manipulator has still an interest to prevent a "clean" breakout of this important chart level and to often force an immediate retest of the broken price level. The reason for this is that the manipulator does not only wants to take out the stops at important chart levels or push price in the market direction of the accumulated position. The market manipulator also has to deal with the typical breakout trader at important chart levels.
So, pushing market price in one direction without many retests of important chart levels would allow many breakout traders to often successfully participate in impulsive price moves. Similar, most of the mainstream traders trade in direction of the trend and the last impulsive market direction.
As we know for every win is a loss in the Forex market. So, while allowing breakout traders to easily participate in a breakout with a small stop the manipulator would miss out some potential gain. So, even when the manipulator wants to push price in one direction far beyond the important chart level (stop loss and limit order zone) it is more profitable to retest some popular breakout chart levels like highs/ lows, where mainstream traders have positioned for a price breakout. This allows the manipulator to catch stops of the breakout traders with tight stops or trailing stops when market retest the breakout level again and penetrates it. Hence, the manipulator tries to maximize its profit by also fooling breakout traders and taking out their stop loss orders with recurring price retests of breakout levels, even in a larger initiated market swing.
Types of Price Retests
- Immediate Price Retest
- Deeper and more time consuming Price Retest
Besides this often observable initial retest of the penetrated striking level, which often leads to a sharp turn around in the market direction, market also often goes for a second, deeper penetration of the striking level to clear the stop loss and limit order zone including farther stop loss orders as well as farther limit orders of breakout traders, who have waited for a candle close confirmation of the breakout candle or any other kind of breakout confirmation.
In general, if market penetrates an important chart level with a "clean breakout" (without initial/ immediate retesting e.g. during News Releases) then the chance increases that market is retesting this price zone again any time soon to take out stop orders of the breakout traders.
Typical Price Breakout
Arguably, a typical break or failed price breakout of a striking chart level often consists of three to four consecutive penetrations of this level within a narrow time frame before a larger move in one or the other directions follows. The recurring penetration of the striking level - gravitation around it- complicates the positioning of the trader as market price often neither breaks through the level without a retest nor directly and strongly switching its direction after the failed first breakout without a second test of the striking level.
Striking chart levels like round numbers and market highs/ lows are often repeatedly penetrated (price gravitates around it) before a larger move occurs so that traders who instinctively use these trading zones as important trigger levels and stop zones are getting stopped out repetitively.
This pattern is similar to the often observed three swings during a consolidation before the major trend continues. See Consolidation patterns
Trading the News Release
Manipulative Price Patterns during News Releases
When a news hits the maket price often impulsively moves up or down so that a clean breakout of a striking chart level without an instantaneous/ immediate price retest can occur. The price pattern of a clean breakout is seldom as the market manipulator usually prevents market price to impulsively break important chart levels. When possible the manipulator uses the one-sided order flow during the penetration of a major chart level to accumulate or distribute a position against the mainstream trader.
During news releases the market manipulator can easily assume how the mainstream traders interpret the news and thus the manipulator can easily accumulate a position against them. Further, after the potential clean break or the impulsive price move most of the mainstream traders interpret the news in regards of the initial market direction as good or bad news. Hence mainstream traders often expect the initial market price reaction to be the "correct interpretation" of the news in terms of further market price direction due to the prevailing popular illusion that the Forex market is an efficient market without any manipulation.
However, the initial move during the news release is often targeted to take out the market stop loss and limit orders at a nearby striking price level before often reversing at least temporarily the market direction to catch the stops of the breakout traders who entered the market with a limit order at the major chart price level. Very often, market price is also completely retracing the initial impulsive move of the news release, which may have cleared the nearby stop zone before reversing market direction completely.
The intention of the mainstream traders to often position themselves in the direction of the initial price movement after the news release immediately or after a price retracement can easily be anticipated by the FX market manipulators. Knowing how the mainstream traders act again eases the process of maximizing the profit of the manipulator.
Furthermore, it is arguable that the manipulators already know the news event beforehand so that they can easily accumulate a trading position in the direction of the news breakout prior to the news event and when the news hits the market the manipulator can distribute its position or even accumulate a new one against the mainstream trader.
In general, if a news hits the market then many breakout traders enter the market with the initial direction of the news event. The market manipulators often go for a retest of this breakout level or for a complete price reversal to stop out the breakout traders and to prevent an "easy win or easy trading strategy" in the Forex market and to maximize profits for the Forex manipulators.
A clean break against typical mainstream setups
Another typical occurrence of a clean break is when the breakout or impulsive market move is against a typical mainstream setup, whereby the manipulators can be relatively sure that most of the mainstream traders are already positioned or look for positioning in the opposite market direction. In this case the sudden move in the unanticipated market direction allows for a large profit opportunity for the market manipulators,which probably already accumulated a position against the typical mainstream trading setup before pushing price.
An example of this could be the neckline break of an obvious Head and Shoulders pattern, which is used as a typical mainstream trigger signal. So, the Forex Manipulators can easily accumulate a position against the mainstream traders who are looking for a position in regards of the Head and Shoulders pattern. Thus, a sudden market price reversal with clean breaks is not anticipated by most of the mainstream breakout traders and the sudden impulsive price reversal allows for profit maximization for the Forex manipulators as the unanticipated price reversal after the penetration of the neckline is hitting many traders hard when a tide stop loss is not used or can not be triggered. Often, the "good looking" typical mainstream setup might also motivate traders to use a larger stop loss.