8. Front-Running

Front-running involves a broker or trader executing orders based on advance knowledge of pending orders from clients. This practice allows them to profit before the client’s order is executed, often at the client’s expense.

Example:
A broker sees a large buy order for NZD/USD about to be placed. They purchase NZD/USD beforehand at a lower price, and once the order is executed, they sell at a profit, leaving the original trader at a disadvantage.

9. False News or Rumors

Some market participants may spread false news or rumors to create volatility. This tactic can lead traders to make impulsive decisions based on misinformation, allowing manipulators to profit from the subsequent price movements.

Example:
A trader spreads a rumor on social media that a central bank will change interest rates unexpectedly. This creates volatility, causing traders to react and make impulsive trades based on the false information.

10. Churning

Churning refers to the practice of making excessive trades to generate commissions for brokers, rather than to benefit the client. This can lead to increased costs and potential losses for traders who are unaware of the manipulation.

Example:

A broker continuously buys and sells a currency pair on behalf of a client to generate commissions. The client ends up with a series of small losses while the broker profits from the transaction fees.

11. Paint the Tape

This technique involves making a series of trades that create the illusion of increased activity or interest in a currency pair. By artificially inflating trading volume, manipulators can mislead other traders into participating in a false trend.

Example:
A group of traders collaborates to buy and sell a specific currency pair among themselves in rapid succession. This creates the illusion of high trading volume and interest in that pair. Other traders, seeing the increased activity, jump in, only to find themselves stuck when the group stops trading, causing the price to fall.

12. Layering

Layering is the practice of placing multiple orders at different price levels to create the appearance of demand or supply. Once the price moves in a desired direction, the manipulator cancels the orders, leaving other traders caught in the movement.

Example:
A trader places multiple buy orders for USD/CHF at various price levels just below the current market price. As the price starts to approach these levels, other traders notice the apparent demand and begin buying. Once the price rises, the original trader cancels their orders before execution, profiting from the price increase.

13. Quote Stuffing

Quote stuffing involves sending a large number of orders to the market in a short period, overwhelming the system. This can create confusion and mislead other traders, allowing manipulators to benefit from the resulting market volatility.

Example:
A trader sends a flood of buy and sell orders for a currency pair within milliseconds, overwhelming the trading system. This action creates confusion in the market, leading other traders to misinterpret the true supply and demand. Once the market reacts to the chaos, the manipulator takes advantage of the price movement.

14. Market Spoofing

Market spoofing involves placing large orders with the intent to cancel them before execution. This tactic can create false signals in the market, influencing the prices to move in a way that benefits the spoofer.

Example:
A trader places a large sell order for GBP/USD at a price far above the current market price, creating a false impression of supply. Other traders, seeing the large order, may decide to sell to avoid losses, driving the price down. The manipulator then cancels their original sell order and buys at the lower price, profiting from the price drop.

15. Insider Trading

Insider trading occurs when individuals with non-public information about a currency or economic event trade based on that information. This practice is illegal and undermines the integrity of the market.

Example:

A senior executive at a major bank receives confidential information about an upcoming positive economic report that is expected to boost the value of the bank’s currency pair, USD/JPY. Before the news is publicly announced, the executive purchases a large amount of USD/JPY at 110.00.

Once the report is released and the price rises to 112.00 due to increased market enthusiasm, the executive sells their position for a significant profit. This practice is illegal and undermines market integrity, as the executive exploited non-public information for personal gain, disadvantaging other traders who were unaware of the news.

Understanding these manipulation techniques is essential for traders to navigate the forex market wisely. Always conduct thorough research and choose brokers who adhere to ethical standards.