Is FX trading rigged?

FX Strategy Articles > FX-guides

Many people that are new to FX Trading ask whether FX trading is rigged or not. It’s a great question to ask. Let me provide the best answer I can.

First some background! Most FX platforms construct exchange rates by taking data feeds from a number of providers and taking the average rate across those providers. Some platforms I have spoken with take up to 8 independent prices to construct one rate.

FX platforms fall into two categories.

1. Those that take a position (market markers). These operators win if you lose and lose if you win.

2. Those that act purely as an exchange heding off any positons.

I have heard plenty of arguments that those that take a position can manipulate prices to trigger stop losses artificially. Personally, I think that this line has been propagated by losing FX traders looking for an excuse for their poor trading.

Having said that, technically it is possible for an FX platform to do this. I think the motivation would only be there for massive positions from long term winning traders, but I think it’s a stretch to think any of the big operators do this.

If you have any doubts, stick with the FX platforms that don’t take a position.  Having worked a lot with eToro, I know they don’t hold any positions. They have no motivation at all to manipulate prices. In fact, the more winners they have the better as they work on trade volume. I can’t personally vouch for other sites having this business model, but I am confident any of the big providers are above board.

Published on 12th of April 2011
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