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Who's To Blame for Spikes in the forex market.

broker-stealingSpikes in any market are defined as quick, steep or fast rallies that are seen in the prices of an instrument. On the tick chart spikes can be seen clearly, a period of slow moving price action followed by a spike up or down which within second reverses back to pre-spike levels. Some of the known causes of spikes in the market are attributed to major fundamental economic releases such as the famous NFP or Non-Farm Payroll, other news releases also cause spikes, however there are spikes that are not caused by a news release but simply by the forex broker quickly changing their pricing in an attempt to catch traders off guard and hit pre-existing stop loss orders. It is not surprising that we find a huge number of investors losing money during spikes in the forex market as they are caught of guard.

This guide is meant to help you truly understand the various forces affecting the market during spikes. Let’s look at the primary causes of spikes in the market:

* Central Banks – We are aware of Central Banks intervening by buying/selling large amount of currencies in one hit, this does affect the market in a spontaneous manner.

* News Events – News events like NFP usually when they are released will cause a lot of noise in the market. Other news events that come out unexpectedly such as a surprise interest rate hike/cut can also cause significant spikes in the market.


* Interest Rate Changes – Investors closely monitor the interest rates in different regions and they tend to move cash around based on suitable rates.

* Employment Numbers – This data does affects the market hugely, especially in the currency’s country of origin.

* Broker manipulating price – A forex broker manipulating the price might sound unreal, but any trader who has been around for a while can attribute a good number of spikes to manipulators, whether it is the forex broker who you trade with or the counterparty to your broker, someone on the other side is after your money.

Most of the time it is not the fault of the forex broker when you experience spikes in the market, but in most cases market does revert back towards its previous pre-spike level, once the impact of such spikes get exhausted in the market. Spikes are not that difficult to identify. They are characterized by rapid price action that actually cannot be explained technically in most cases. It is even more obvious when we find spikes in the forex market during times when there are little or no economic events on the calendar and price begins to get erratic. This is the type of spike that we refer to as stop hunting, someone knows that there are a lot of stop losses at a certain level and wants to take them out. It is quite possible that you could be caught in price spikes if you have positions with hard stop losses, your best bet is to deal with an honest forex brokerage that does not engage in such practices.

Usually a brokerage regulated by a well-respected authority is much less likely to “spike” you than a fly by night brokerage operating out of someone’s basement. It is impossible to rule out the fact that they are times in the market when we find rogue brokers that would do anything to steal money from the clients. You’ll notice this when spikes occur just on your platform alone and no other charting tool has those. Sometimes, it is unintentional and a glitch from your broker and you stand to be reinstated, however many times it is intentional and you might fall the victim of an unscrupulous forex broker. For those who sit on their computer to monitor their trades, it is frustrating to find such rapid price moves. However, spikes have become a part trader’s lives and traders need to be prepared for this.

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