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Why Market Manipulation Doesn’t Matter To Pattern Traders

Mark Shawzin
April 23, 2021

There’s one type of comment I get a lot on social media.

It seems there’s a subculture of market observers out there (it’s hard to call them “traders”, I guess) who are convinced the markets are manipulated. 

In their eyes, it’s a waste of time to trade.

Here’s a sampling of some of these comments I’ve seen recently:

Comments like these remind me of how there are two types of people in the world: some see the glass as half-empty, and others see it as half-full.

Where some people see opportunities to profit, others see opportunities to lose.

It really does show just how important psychology is to becoming a winning trader. 

If you think you’re going to lose, you’re going to lose. There really isn’t any possible upside if you’ve defeated yourself before you even get started.

On the other hand, a winning attitude is one that stays positive even after a loss (or a few of them). A winning attitude is one that finds a way around obstacles and finds ways to get better.

The fact is, if forex is “rigged” or “manipulated” then so is every market in existence, including crypto and anything else you care to name. Using “manipulation” as an excuse not to trade (or to dismiss a given methodology or system) is ultimately pointless.

So there’s no need to be conspiratorial, even when there's often no easy answer to explain why a given market moves up or down on a particular day.

That’s because most traders fail to appreciate the external factors acting on markets. These include interest rates, fiscal and economic policy decisions, liquidity crises at major institutions, and so on. What might seem like manipulation is instead a consequence of forces and factors beyond that trader’s understanding.

You could argue that central banks setting interest rates is a form of manipulation. And you might be right. But there’s nothing you or I can do about it. 

The market is simply going to do what it’s going to do in response to that “manipulation”. The market just reacts to the information it receives. And the resulting price action will be out in the open for everyone to see.

That’s the key point here: the results of the “manipulation” and “rigging” are right there in the price action. On the price chart. With every tick and every trade displayed in full view!

Of course, large institutions can play games to push prices around temporarily. 

However, on the whole the market tends to move in somewhat predictable patterns as a result of crowd psychology and human emotions. And those are timeless. 

We still move in crowds, we still apply emotions (often too many of them) to our decisions, and we still make the same mistakes time after time.

That kind of predictability is what spells “opportunity” in the markets.

While you can't always determine when and where the market will move (otherwise trading would be easy) there are times when the probability of a move in one direction is higher than the other direction. 

That when you have an edge.

When you know from your studies and research that when A and B and C occur together, the market is much more likely to move up than down (or sideways), that’s an opportunity.

That's when you put on a trade, and then sit back and see if you're right. 

If you truly do have an edge (and apply good risk management) you'll win more than you lose when A and B and C occur. That’s how you generate consistent profits over time. 

A + B + C might be a Double Bottom + an Ascending Triangle + an Inside Bar, for example. (Two bullish patterns plus price action to set up a good entry point with an acceptable stop loss.)

A + B + C might be a Head & Shoulders + a Key Reversal Bar + another Key Reversal Bar. (A bearish pattern plus bearish price action to support the pattern and indicate a drop is imminent.)

A + B + C might be an Uptrend + a Double Top + a Breakdown and Pullback. (A bullish trend capped by a reversal pattern and then a confirmation of that reversal.)

It ultimately doesn’t matter exactly what they are. What does matter is that they agree with one another and that -- through your studies and experience -- you’ve seen they give you a real edge in the market.

It works the same in any market: stocks, bonds, forex, and crypto.

Trends, patterns and price action are always the visual output of all that “manipulation” certain people love to complain about: human psychology, emotions and so on. 

They represent the summed total of all the information the market has available, and how all the market participants feel about it.

So do trends, patterns and price action work every time?

Of course not! 

But when we take a loss as pattern traders, it’s not because of “manipulation.” Simple random chance can move the markets against us -- even when we have an edge.

There’s no need to fear “manipulation” that causes you to lose. That same “manipulation” is just as likely to cause you to win, too!

So don’t attribute to malice what is usually just random chance. 

And don’t let “chance” keep you from trading, because chance is what works in your favor when you have a genuine edge. 

We never know the future with certainty. But there are times when probability favors us, and that’s what gives us winning trades and profitable trading careers.

I hope the people who complain about “rigged” or “manipulated” markets read this and think about how to better approach trading and investing. 

It’s a much more positive approach to life, and a much more profitable approach to trading too!

What do you think? Let me know if this helped change your mind about the markets … or improved your trading in some way.