Market Manipulation Unveiled:
From Artistic Creation to Loss-Reducing Techniques
When I initially ventured into trading, I found myself captivated by the dynamic energy and the intricate world of charting. Like many, I harbored dreams of breaking free from the daily grind, and I confess, I took the plunge by investing my life savings into a Forex account, hoping to tell my job and its frustrations to take a back seat. My journey, however, was anything but smooth.
In the initial week, luck seemed to be on my side, as I witnessed gains. But, the following week was a stark reminder of the unforgiving nature of the markets, where losses piled up rapidly. Fortunately, a moment of clarity dawned upon me, leading me to consider a safer route – the demo account. This marked the beginning of my trading odyssey, and the very first lesson etched into my trading strategy was crystal clear: “Only risk what you are prepared to lose.” Moreover, I came to understand that there’s absolutely no shame in honing your skills through a demo account. In fact, treating it as a vital component of your trading strategy can be a wise move (not to mention its tax benefits).
But let’s shift our focus. This article isn’t about trading basics or strategies. Instead, it delves into the inspiration behind my artwork, “Market Manipulation,” a pivotal piece of a larger NFT collection titled ‘A Day At The Market.’
You Got This Right: Out Smart the House..
One of the most frequently discussed topics in my trading journey revolved around market manipulation within the Forex market, particularly on specific currency pairs. I vividly recall instances where high-impact news events would trigger wild fluctuations, with the market ticker dancing up and down by a staggering 300 pips. And, I must confess, I couldn’t resist the temptation to trade during these frenzied moments, often ending up with significant losses.
During one of my forays into educational trading videos, I stumbled upon a seemingly straightforward strategy for tackling these high-impact news events. The trader advocated a technique involving simultaneous entry into both a long position with 1.00 lot size and a short position with 1.00 lot size, essentially hedging their bets. Now, it’s worth noting that hedging is perfectly legal in several countries, but in the USA, it’s a different story – it’s officially prohibited. However, some traders found a workaround by using two different account numbers. Intrigued by its apparent simplicity, I decided to give it a shot, only to witness my trading account swiftly dwindle, leaving me perplexed and pondering, “I thought this would work.”
Upon taking a step back and examining the broader picture, I found myself asking a fundamental question: “Is this truly a viable strategy?” In earnest reflection, my answer circled back to me as, “Well, perhaps to some extent, but it lacks a solid foundation.” Ultimately, it dawned on me that attempting to manipulate the market by employing two account numbers in a long/short position setup was a risky venture fraught with uncertainty.
As I continued to learn and grow in my trading journey, I stumbled upon a valuable piece of advice when it came to handling high-impact news events: sometimes, the best strategy is simply not to trade them at all. Alternatively, one can opt for a larger timeframe, a zone less susceptible to the tumultuous effects of these events, as a means to preserve capital and minimize exposure to market manipulation.
Protecting Your Trades: You must always use a Stop Loss
However, my realization about market manipulation didn’t originate there. It actually began with the seemingly benign concept of the “Stop Loss.” You know, that well-intentioned mechanism meant to safeguard your trades. In my early days of trading, I focused on the USD/JPY pair, affectionately referred to as the “gopher.” It appeared relatively stable, without any drastic price swings that would raise alarms.
So, I initiated my trading journey with the smallest lot size available, and I diligently set a 50-pip stop loss trigger. I’d go about my daily work routine, and inevitably, I’d receive that dreaded notification: “stop loss triggered.” It was disheartening, to say the least. I’d re-enter the trade, this time with a slightly wider stop loss, say 100 pips. Yet, history repeated itself, and I’d receive yet another notification.
This cycle continued until I found myself setting the trigger at an astonishing 500 pips, firmly believing that there was no way the market would reach such a distant point to trigger my stop loss.
To my astonishment, it did. Reflecting on this experience, I often wonder whether it was a case of market manipulation or simply my own inexperience leading the way. If we examine the chart (I apologize, but TradingView only provides data up to this point on a 4-hour timeframe), it’s evident that I entered the trade in the morning, initially securing a profit. However, come 2 pm, as I was cruising down the freeway, that unmistakable notification rang out, “Stop loss triggered.” To say I was frustrated is an understatement; I watched approximately $400 vanish in an instant.
But can this unfortunate incident truly be chalked up to market manipulation? I’d venture to say no. Why? Because when we zoom out to a larger timeframe, the broader market context reveals that it was ensnared in a clear downtrend, while I was persistently taking long positions. A closer look at my indicators or a simple glance at the SMA (Simple Moving Average) would have illuminated the prevailing downtrend, leading to a more informed trading decision. In retrospect, it was a valuable lesson in the importance of aligning trades with the prevailing market sentiment rather than attributing losses solely to manipulation.
Ask the Question: Does Market Manipulation Really Exist or is it just traders not knowing how to trade?
The incident I previously described prompted me to delve deep into the realm of stop loss manipulation, a revelation that caught me off guard. To my astonishment, I discovered that such practices indeed exist, functioning as a sort of “risk management tool” from the broker’s perspective. Interestingly, some brokers employ MT4 plugins, notably one named the “Virtual Dealer Plugin.” It’s intriguing to note that if you search for information on this plugin, you may come across videos on YouTube that seem to mysteriously vanish over time (the reasons behind their removal are worth pondering).
This “Virtual Dealer Plugin” bestows upon the broker a plethora of options to maneuver the market to their advantage, while simultaneously diminishing their risk of losses when dealing with clients. As previously mentioned regarding the “Stop Loss,” this tool enables the broker to swiftly push the market in a direction that triggers your stop loss, effectively closing out your position. Beyond this, the plugin provides additional levers of control, such as market slippage and the ability to alter your entry price.
For novice traders like myself at that time, grappling with chart analysis alone was challenging enough, let alone monitoring brokers for potentially fraudulent activities. It served as a stark reminder of the importance of due diligence when selecting a broker and remaining vigilant in the trading landscape.
You can even read the pdf document that brokers use to setup the plugin metatrader virtual dealer plugin
Protecting Your Trades: Effective Strategies Against Stop Loss Manipulation
So, how does one safeguard themselves against these potentially detrimental practices? Based on my experiences, particularly concerning Stop Loss manipulation, here are some strategies I’ve found effective:
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- Larger Timeframes and Wide Stop Loss: In my case, adopting a larger timeframe and implementing a considerably wide stop loss proved to be a reliable approach. This approach provides more room for market fluctuations and reduces the likelihood of your stop loss getting triggered prematurely.
- Manual Monitoring: Another strategy involves forgoing the use of a predefined stop loss altogether and instead setting up notifications for specific price levels. When the price reaches a predetermined point, you receive a notification, allowing you to manually assess the situation and make a conscious decision to close the trade if necessary.
As for choosing between regulated and unregulated brokers, my perspective is that it may not offer foolproof protection. Regulated brokers, although subject to oversight, may still engage in such practices when they find themselves in need of capital, as the financial penalties may be outweighed by the potential gains. On the other hand, unregulated brokers might be even more audacious, as they operate without the constraints of regulatory oversight.
As someone who tends to take longer positions, I have discovered that utilizing larger timeframes and setting up notifications aligns well with my trading style. This approach limits the brokers’ ability to manipulate your trades since there are fewer specific price points like stop loss levels to exploit. It’s a prudent way to navigate the trading landscape and mitigate the risks associated with manipulation.
The Path Forward: Learning from Market Manipulation and Creating Art from It..
Should these revelations deter people from pursuing trading? Absolutely not. It’s important to recognize that while some brokers engage in unscrupulous practices like stop loss manipulation, there are reputable ones out there. Broker checks and due diligence can help you identify the trustworthy ones amidst the crowd.
In light of my own experiences, I firmly believe that people should be informed about these manipulative tactics that can occur in the trading world. It underscores the importance of practicing sound risk management and only investing what you can afford to lose.
One silver lining in this journey is that I’ve gained invaluable insights into various forms of market manipulation. This newfound knowledge has even inspired me to channel my experiences into an abstract art piece. Through this artwork, I aim to shed light on these issues while offering multiple variations of it to the public, creating a unique fusion of art and awareness. So, while trading may have its challenges, it can also serve as a wellspring of inspiration and creativity.
If you are interested in purchasing an NFT from this collection you can go to jmaaf.org/nft or for the specific NFT you can go to the two marketplaces below that are specific to MarketManipulation
If you would like to view the contract you may do so here:
contract: 0xe23e323dc2A1861BCEfbC77Af5bee20E937655c0