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History of money
The word speculation in the financial world refers to risky financial transactions, which can result in a large loss, but if
successful, the value of the gain can significantly outweigh the risk. Speculation in itself is not a negative phenomenon if
it refers to some person who risks their money, hoping for a sudden and large change in the price of the product on which he
is speculating, without affecting the market itself. The problem is the large multinationals, banks and investment funds which,
having large financial resources, have the ability to directly influence the price, that is, to manipulate the market. Often
such actions are on the verge of ethics and legal regulations and can sometimes adversely affect the lives of millions of people.
On many Forex sites you will find the statement that it is not possible to manipulate this money market for the simple reason
that it is a huge market where several trillions of dollars are traded every day and that it is also very heterogeneous. They
make this statement to reassure potential clients and not discourage them from trading due to unclear operating conditions.
History tells us unequivocally that the financial market can be manipulated.
The September 16, 1992 in the history of finance is called Black Wednesday. Hedge Fund Quantum (private speculative investment fund), owned by Robert Soros, sold a huge amount of Italian lira and British pounds. Almost overnight these two currencies depreciated by 30%. In that deal, Quantum earned several billion dollars for its investors in just a few days. How did they manage to do it? Simple! Soros sold these two currencies without owning them. Their price was relentlessly falling and Soros bought them back at a low price, thirty percent less than what he was selling them for. When he completed all the formalities, he found a huge profit in his pocket. Quantum Fund also had two close associates, Italy and Great Britain, whose monetary policies and the state of the state coffers at the time were very bad and almost invited speculators to exploit these weaknesses. But the fundamental basis of that action was the rules of the money market, which were made just for those who wanted to speculate. Being able to sell something you don't own is just an irresistible invitation to try speculative action.
Everything written above referred to the pure Forex market, where only currencies are traded and where it is objectively more difficult to manipulate the market. State banks are in defense of currencies and are a powerful opponent who is not easy to defeat. Today, all providers offer the ability to trade stocks, stock indices, commodities and other financial products. In these fields the possibility of speculation and manipulation is much greater, and the means that are sometimes used for this are truly criminal. There have been several cases of sabotage in the mines of South America and Africa in order to reduce the supply of some raw materials on the world market, which inevitably leads to an increase in the price of the same. Just buy that raw material of sabotage and then resell it at a much higher price. The fact that such earnings sometimes take dozens of human lives away means next to nothing to unscrupulous businessmen. This is our main Western value: monetary gain, with no great regard for the possible consequences.
It is said, but honestly I do not have the elements to confirm it with certainty, that even Forex service suppliers manipulate prices. Their software constantly analyzes the general status of all open positions. It is a relatively simple algorithm that simulates a price change, up and down, and for each step it estimates how much the provider would lose or gain if that price were reached. Let's take an example to better explain the concept. Let's say the current gas price is 9.00. The application assumes a value of 9.50, approximately 5% more than the current value. Then recalculate all open positions to see what would happen if that value was reached. Most of those who bought gas have set "Take profit" and would earn money (this is bad for the provider). Whoever has a short position, ie who has sold, has a "Stop Loss" set and for most of them the position would be closed at a loss (the fact is good for the provider). In the latter case, if 10 leverage was used and when "Stop Loss" is reached with 5%, it means that half of the invested capital has been lost. In the end, the algorithm simply sees the difference between the total loss and the profit of all positions, and if the result is positive (more of how much earned), is favorable for the provider, who in that case, depending on his total profit, decides whether to force the price on the one shown by the simulation. It is normal that this does not happen very often, first of all because it could be noticed, and also because the provider is not interested to small gains. Big profits in such situations are made when the chart has reached a high or low and changes direction. This is where people go from general buying to selling and vice versa, and this is where big profits are made if many positions can be closed because they have reached Stop Loss limit.
What is purpose of this article? On the one hand, it's educational because it shows a speculation that younger people probably can't even remember. The older ones heard the news at that time, which was widely leaked in the media, and they know what happened, but presented here, it comes back to consciousness. The main goal is that traders of currencies and other financial products, like us, always have the idea of the possibility that someone could try to manipulate the market. Suspicion that manipulation is in progress can help make the right decision about opening a position. On the other hand, when a price reaches its maximum or minimum, it can be assumed that Forex providers will try to increase or decrease the price to activate the "Stop Loss". You can try to take advantage of this by placing an order to buy or sell when the price reaches a certain level, some percentage above or below the current value, and hope that someone will intervene as assumed. If so, we can make a good profit. If this does not happen, the order simply has not been executed and we have neither gained nor lost anything.
Always keep in mind the possibility that someone might try to manipulate the market - when it comes to money, it's always good to be suspicious.