Traders Must Beware of Forex Bucket Shops Even in Modern Times


Before all of this technology came to life, people who only want to trade get scammed by fraudulent people. They are very prevalent back then but do not get the impression that they do not exist anymore. People still get fooled and scammed by brokerage firms that we call forex bucket shops.

What is a forex bucket shop?

A forex bucket shop is a brokerage firm with trading practices that do not benefit traders who come to them. Some of these practices include slippage, misquotes, or re-quotes that favor them. They also practice stop hunting. They are willing to scam and fool innocent people to earn money, even in an indecent way.

Why were these forex brokers named as such?

Sometime before, trading is very different from what we have today. Instead of online trading platforms, people trade over the phone, so security was not too strict. A trader would order via the telephone then the broker would write these orders down. However, instead of executing them, they would only drop them on a bucket.

This practice gave life to term bucket shops and bucketeers. The order does not go to the market but the bucket instead. These bucketeers do not let the trader know the actual price of the asset he is trading. As a result, the trader does not have any idea if the price moved or not at all. The bucketeers do not hesitate to tell the trader that the price moved even if it did not as long this lie will benefit them.

Things got better after the improved regulations and enforcement and the rise of more advanced technology like computers and the internet in the long run. However, even with these facts, there are still bucketeers and bucket shops out there that operate. They might not operate precisely the way they did before, but some of them still left who still scams people.

How can a trader avoid bucketeers and bucket shops?

Below is an enumeration of things that can help you pick the tailor-made broker for you:

  • Security. Before entrusting your money to any person who claims as a legitimate broker, no matter how believable they sound, always double-check with regulatory agencies about this person’s credibility.
  • Commission and charges. Brokers have different ways of earning. Some may charge you a commission, and some may put a markup on the spread. Nothing is better than the other. It depends on which transaction costs suit you and your trading style.
  • Deposits and withdrawals. The broker should not give you a hard time to deposit and withdraw. The only time that a broker should hold onto your funds is when he facilitates the trade.
  • Trading platforms. The broker’s trading platform should be easy to use and stable even for first-timers and beginners.
  • Order execution. Your broker should quickly fill in your orders, especially on normal days when there are no news and press releases, and the liquidity is normal.
  • Customer service. Brokers should be friendly and pleasant to you after the trade, even when problems arise. They should be able to help you in any way possible.

Before choosing your forex broker, you should consider these entire first. People engage in trading to earn money and not lose before they even start the actual trading transaction.