Forex trading is expanding its roots worldwide daily, and many people have made incredible profits with forex trading. For some of the world’s population, forex trading is a proper money-making source, but there is also a category of people who believe that forex trading is rigged. It is not possible to make profits and money with forex trading.
In past articles, we analyze forex rigging scandals and various forex scams, including forex signals scams. We know that forex as a business is not a scam, and forex is not rigged. Businesses can be legitimate, but some people can be greedy or unethical, leading to big corporate scandals.
So now the real question is, is forex rigged, and can it be rigged? And are all the people claiming they have made money with forex trading just scamming? So, if you have these questions, this article is very beneficial. This article will provide all the information to help you clear your doubts and queries.
Please read our article about the pyramid scheme.
There is no shortage of trade ways and methods, and you need to figure out what is best for you. Many of you might be confused about the rigged and manipulated thing, so to understand this correctly, you have to understand that most trading players are big commercial institutions like banks. They trade forex and other markets, including futures, stocks, and cryptocurrencies, but making profits with the forex is possible. Getting the trade volume with the required skills and mindset would be best. Every power is in your hands. You will decide when to make a trade and when to get out, but you will need to learn to make the calculated moves. There are many YouTube videos available where you can quickly get free knowledge.
We must separate forex rigging (forex fix) and forex scams as different things.
Fx Trading: What Does it Mean?
The FX fixing issue has not been in the news for a very long time, and it’s been a while since it was a headline in every mainstream media, but it still arises sometimes. There was a time when banks conspired to create change in the market, and at that time, this issue became the most talked about thing and was everywhere. Banks and other big players conspired because forex is a huge market, and it is impossible for a single bank or any big player to create a significant change or movement in the FX market. The forex scam happened because of the big players in the market for a very long time and the different banks. These banks include Citibank, HSBC, JPMorgan, and many more.
Before we make examples, I want to explain the most crucial part:
Forex trading is not rigged, and it is a legitimate and regulated business activity akin to trading stocks, commodities, and futures, where participants buy and sell currencies based on market conditions and economic indicators. While misconduct has occurred, most forex trading is conducted fairly and transparently, adhering to strict financial regulations designed to protect investors and ensure market integrity.
The foreign exchange (forex) market, one of the world’s largest and most liquid financial markets, has seen its share of scandals over the years. These scandals have often involved manipulation by banks, insider trading, and other unethical practices. Here are some notable examples:
- Libor and Forex Manipulation Scandal: Major banks were found manipulating the London Interbank Offered Rate (Libor) and foreign exchange rates to profit from trades, leading to billions in fines and a shake-up in how rates are set.
- HSBC Currency Trading Scandal: In 2016, HSBC was involved in a case where traders misused confidential client information for their profit in currency trades, leading to legal action and a significant fine.
- Barclays Forex Rigging: Barclays and several other global banks were fined in 2015 for manipulating forex markets through a chat room called “The Cartel,” where traders colluded on trading strategies to manipulate currency benchmarks.
- JP Morgan Chase Forex Manipulation: JP Morgan was part of the group of banks fined for manipulating foreign exchange rates, affecting billions of dollars in trades and undermining market integrity.
- Wells Fargo Foreign Exchange Scandal: In 2017, Wells Fargo faced allegations of overcharging small businesses for foreign exchange transactions, leading to internal investigations and regulatory scrutiny.
- Bank of America Merrill Lynch Fine: In 2019, Bank of America Merrill Lynch was fined for failing to adequately oversee traders in chat rooms where confidential client information was shared and used for potentially manipulative strategies.
These examples illustrate a range of unethical behaviors in the forex industry, from collusion and market manipulation to misuse of client information, underscoring the importance of regulatory oversight and ethical conduct in financial markets.
So these big players and banks came together and manipulated Reuters’ bank, which occurred at 4 pm (London time). So what they did was they froze the prices during the time, and it helped the banks in making a move right before the freeze, and it resulted in small change that was not that noticeable, but that minor turns into big when a lot of clients are taking your services for the FX trading. It results in a considerable profit from the client’s pocket, and the clients are unaware that their money is going. So, it is always recommended that it is better not to do any trade activity at the close of market sessions, and 4-6 pm EST for the NY session is the suggested one.
Forex Manipulation?
As you may already know, forex is the biggest currency market worldwide, and transactions of trillions of dollars are happening every day. Let us talk about figures, then $5.3 trillion in transactions. As it is the largest financial market, only more prominent players can manipulate it. These major players are mostly investment banks, private equity firms, hedge funds, big corporations, and central banks.
Can You Do Forex Trading in the USA?
Banks use the money you have deposited in your bank to make more money with the help of forex trading, and forex is not considered an illegal activity in the USA. Forex is legal, and anyone above 18 in the USA can do forex trading and invest their money. Some rules like FIFO help to protect the retail trader from any financial losses. If you use a USA broker, there is a rule that hedging is not allowed.
Most people hedge when they profit, but everyone must follow this rule. Another point that everyone should take care of while using a US-regulated broker is that it is impossible to have short or long open on a pair, and 50:1 is the leverage limit. All these rules and regulations are important because they help keep money safe.
FX Fixing And Forex Scandal
The government will fix the exchange rates between the two currencies. In simple words, at 4 pm London time, daily exchange rates were fixed, and based on transaction time, fixed rates were calculated by WM-Reuters. When big players and banks like Citibank and JPMorgan conspired, they banged the close. Banging the close is a disruptive activity used to manipulate the market in which the player buys or sells large quantities to manipulate the prices and distort the fix to make profits. You can read details about top forex scandals in our post.
There are changes in the forex, like the 1-minute window changes to 5 min, and the five-minute window is hard to manipulate. There are new changes for banks, such as they are intended to hold to an ethical code of conduct. Still, all the newcomers should try to avoid any trade at the close of the NY time session.
So, in the end, to repeat – forex trading is a legitimate business, trading stocks or commodities, futures, and only big banks and big players can do forex fixing (forex rigging), but it is infrequent.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
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