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Trading the FX Price Manipulation

Price Rigging as a Trading Strategy



How is market price manipulated?



The manipulator is moving the market to these striking chart levels by inducing buying or selling pressure to book in profit by the opposing order flow of the stop/ limit orders at the breakout. So, the manipulator's strategy is to induce volume to trigger the stop/ limit market orders but after market has penetrated the market low/ high there is often no interest of the manipulator to push price further, which would be in the interest of all the breakout traders.

The reason for this is that the manipulator has already triggered “all” nearby stop loss orders and breakout limit orders. The manipulator can now use the stop loss and breakout limit order volume to close its position or to position against the breakout traders, because the only stop loss orders, which are “left” in the market are these of the breakout traders, which can be targeted now to maximize profit by the manipulator.

The large accumulation of stop and limit orders above highs/ lows are often the only reason for “the market" to move price to these zones and hence the reason for the often seen false first breakout. You rarely see a clean breakout at a major high/ low without a significant retracement after the first breakout. When the retracement of price during the failed breakout and the clearing of the stop loss orders of many breakout traders is accomplished the true breakout is more likely to occur in which the manipulator has accumulated.


Price Rigging in the EURUSD, GBP/USD, EUR/GBP and in the other FX Majors



The analyzed manipulative market price patterns are repeating over and over, particularly in the EURUSD, GBP/USD and EUR/GBP, as well as in the other FX Majors. During News Events/ Release the higher expected volatility is used to target the stop orders and limit orders at important chart price levels. The manipulated market price action during News Releases often initially penetrates a recent market extreme to trigger the stop and limit orders before the market is reversing strongly thus taking out most of the stop orders at the extremes plus fooling breakout traders, who got caught in the wrong market direction.

In general, a stronger market price swing in the FX market is most often preceded by a penetration of an obvious stop loss and limit order zone or at least a quick price shakeout before the impulsive market price swing in the opposite market direction occurs. This manipulative price behavior is deeply implemented in the market price action as it is observable on lower time frames (1 min) and smaller price waves up to higher time frames (daily/ weekly) and larger market swings on the Forex Major pairs.

The occurrence of the underlying market price manipulation in the major Forex market pairs also during very short time frames suggests that the manipulative price action is already implemented in automated trading algorithm, whereby the Forex market manipulators use their underlying market power to shift price movements in their interest.



Trading the Price Manipulation in the Forex Market 



How to trade the Forex Market Manipulation



So these Support/ Resistance levels, in particular highs and lows, are important chart levels because if a trader understands the game of the FX manipulator then the trader can analyze the manipulator's strategy and the trader can concentrate on trading signals for a true or false price breakout at these market levels.

False breakouts are most often visible as price rejection on the chart. A trader can also go for the true breakout after most of the breakout traders got stopped out, particularly when the price breakout would be in the market direction of an important major Stop loss zone. Similar, another trader's strategy would be to position in the direction of the anticipated stop loss and limit order zone, particular entering after a significant price rejection.

There are some chart signals which favor a false breakout/ price rejection (first test with many limit orders at the striking level; unconfirmed breakout candle) as well as some trading signals for a true breakout (limit "breakout" orders got already cleared and maybe a strong hourly close at this level (Breakout Timing), which often could lead to a breakout with the new hourly candle and so on).

Another interesting observation is that the more time a trader gets to trade in accordance of a mainstream setup the likelier is its failure. As already said mainstream setup strategies should be traded with caution - including Simple Moving Averages.


Analyzing related Forex pairs



Furthermore, it is important to analyze the other Forex pairs and Forex crosses for important stop loss and limit order zones like highs/ lows to get a comprehensive view for potential manipulative price action (e.g. stop hunting and market price reversals at important chart levels) in related Forex pairs.

If for example the EUR/USD (also the GBP/USD due to correlation to the EUR/USD) and maybe the EUR/JPY or the EUR/GBP reached a major stop and limit order zone like an important high/ low then the likelihood of  a stop run in these pairs with a potential strong reversal increases, particular if for example the USD/JPY is reversing to the opposite after clearing a stop/ limit order level.

The chance for the occurrence of a manipulative stop run and reversal increases when the manipulative stop and limit order hunting potential in related Forex pairs is related, thus the manipulative stop run in one Forex pair is also supporting the manipulative stop run in an related pair hence the potential profit by the manipulator increases and with it the likelihood of the manipulator to engage in this price rigging process.



Trading with the Market Manipulation 



So, it will not be easy to track the strategy of the market manipulator but its worth to think about Forex from this perspective.

As already said: A very good indication for the direction and the strength of the next major FX market moves/ swings are the targeted price zones of the most important mainstream stop order and limit breakout order levels, most often at striking levels like highs and lows, round numbers and pivot points. Furthermore, the analysis of related Forex pairs in regards of manipulative comovements e.g. after a stop run in different pairs can increase the likelihood of a trading strategy to be profitable.

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