In Market Wizards, Bill Lispchutz , the sultan of currencies is quoted as saying FX is all about relationships. That was in the days trading was done over the phone. I understand trading is still done that way for some type of trades for ex. between institutions and corporate treasuries. So my thinking is it must be easy for bank market makers to exchange infos on transactions between themselves and with big customers and then collude to move prices a certain way. Has the FX market ever been investigated by regulators ? As a FX trader I can almost feel the manipulation, , price will almost always go to where the maximum pain for traders is , just before reverting. I am convinced FX is manipulated at least in some ways, but what I don't understand is since it's mostly electronic nowadays , the manipulation should be on the decline, but it seems to be the opposite, in more than 5 years of FX trading, the B.S. has become the rule rather than an occasional occurence. One explanation could be that one channel of info used by manipulators ( relationships) was replaced by another , dealers some of them control a large portion of retail trading know the stop orders and may be able to exploit them. Some firms , for ex. Dukascopy even seem to have developed programs that trade prop funds to take advantage of that kind of info (their managed account info used to state if I am not mistaken that they were able to take advantage of their position to achieve their returns) . To me it seems that the door is open for the most egregious manipulations by those processing orders. Everybody I guess would agree that B.S. is now a daily phenomenon, but would people with institutional experience agree that the B.S. moves are mostly engineered rather than the consequence of too many players chasing the same opportunities ?
I have no direct knowledge but my own personal observations as an independent trader of 4 years. FX is an unregulated market. By that definition alone, insider trading - in all its forms - is 100% legal. That includes frontrunning headline numbers, client orders, aggregated retail books, HFT's etc. Based on price action, yes, FX is a constant suckering in of weak hands, to slam it back and run stops. Every market is like that. The appearance of more BS than usual is range contraction. Big flowy trends lends the appearance of orderly, natural markets. Even though on the micro level, the same games are played, just with larger consequences. When range contracts, the consequences of suckering aren't as pronounced, making trends shorter, with a 'quicker' opportunity to revert, which they often do. That said, I find FX to be more extreme. Whereas pullbacks in other instruments might be 50% of the last move, FX pullbacks are deep, severe, and designed to get everyone going the wrong way. Just a matter of perspective. Judging from the performance of various funds, banks, and desks, the appearance of collusion is more myth than fact, imo. While I totally agree institutional sharks collude when they can, their annual performance doesn't bear that theory out, to much degree. The reason being, in my experience, the market has a natural ebb and flow where smart traders who understand how the market moves, can intuitively *feel* good levels as they come. This makes it especially difficult for manipulators to successfully collude, unless they're hugely levered one way. In a vastly deep market like FX, that's a big risk.
Yup, here we go again........the blame game. Classic "I don't know what i'm doing, so i'm going to blame someone else" philosophy. Tell you what guys, the more you chime in and support this crap the worse off it's going to be for you.
^To say the market doesn't move to screw the most people, makes me wonder if you actually know how to trade?
Of course they want to play the blame game, its the only way they can cover up the fact they dont know what they're doing. Collusion here, front running there, the finger pointing never ends. It took me over 2 years to figure it out, with the help of a few good friends I met online who are masters at FX trading. .......then to make matters worse for themselves they open accounts at bucketshops(instead of an ECN), lol. Like my father always said, theres a sucker born every minute in this world, and those are the ones its easiest to take money from.
let me guess, and ... you are willing to share your new knowledge of trading master with us for a fee ? Actually I AM blaming the markets, the markets are a real POS, manipulated (especially FX I am convinced) and made of a majority of morons (hence the B.S., some of it at least ). The markets are stupid, like people , sometimes I wish they would shut them down. I wouldn't spend my time on trading and watching . But as far as FX is concerned, percentage wise I have done well, probably better than most FX punters around here, better than most managers I looked at . So I can make money but still hate the B.S. .
"price will almost always go to where the maximum pain for traders is , just before reverting." If you know where "price will almost always go", it should be a snap for you to coin money from the game.
Wasn't Lispchutz the one who talked about how good the Soviets were at currency trading? Suffice it to say, many things have changed since then. If you know where the max pain points are, why not exploit them yourself instead of whining about "B.S" moves?
(1) Central banks participate in the FX market to effect monetary policy. They are not profit maximizing. They are not trading. They are there to move the market in a direction of their choosing. If you want to call this manipulation (I suppose it is), then obviously the FX market is manipulated. (2) The FX market, like the bond market, is decentralized without a lot of business done over voice; So yes, obviously traders gain information (called 'market color' by those of us who deal in OTC markets) by talking to their counterparties and find out what others are doing. None of this is special. Every market in the world work similarly to some extent. (3) There are other players - corporates who are trying to hedge their fx exposures, etc - who are not too price sensitive. Their goal isn't to maximize trading profits, but to effect a certain hedge. So they may effect moves that seem 'wrong' (not sure what that really means in any case). So, - it's a manipulated market in the sense that a significant part of its ecology are made up non-profit-maximizing players. But I don't think this is the definition of manipulated you are looking for. Retail accounts and $5,000/pip trades don't matter except to the bucket shops what are ripping your faces of - but that's a separate story all together.