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Chapter 9. Trading Inside the 24-Hour St... > Just Because You're Not Paranoid Doe...

Just Because You're Not Paranoid Doesn't Mean They Aren't Out to Get You

It is commonly argued that Forex firms today would never resort to such dishonest activity. But unless there is direct regulation regarding pricing (and there isn't any yet), the hint of impropriety will be there. As long as dealers can see your positions while offering you prices, the temptation to price aggressively will be a problem.

However, the growth in the number of retail clients over the past few years has made this kind of behavior increasingly difficult to carry out. Firms now have thousands of clients watching currency movements, physically or with automation (API). This scrutiny has limited the flexibility market makers have over pricing. For example, if a market maker attempts a stop sweep (when a dealer artificially spikes the market to trigger stop orders), traders will be ready to scalp the dealer (trading on inefficiency between real and indicative prices). This can be so costly to the market maker that it's not worth it.


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