A bucket shop broker is by definition an illegal brokerage company hold customers orders for long after accepting them before executing them. This name is derived from the general practice of placing orders in a bucket rather than executing them immediately. In this case, the Forex broker intentionally delays the execution of the trader orders that they received. They do this for various reasons which are primarily fraud-oriented. There are many such brokers in the market that will accept the customer orders but hold them for sometimes before executing. There are different ways through which you can recognize these fraudulent Forex brokers. Provided below are some basic methods used to identify bucket shop brokers.
Delayed Execution Of Trade Orders
Just as illustrated in the definition, bucket shop Forex brokers delay the execution of customer trade orders. If your broker is not executing your trade orders immediately then chances are that you are using a bucket shop broker. They delay execution of customer orders basically to garner better market position before attempting to execute the orders. Such Forex broker simply holds a customer orders until a point where the trade would be advantageous to their firm. At this point, they can execute your order and gains substantial margin which they keep in form of profit.
Fraudulent Transactions
You will realize that these Forex brokers have long history of fraudulent transactions. Majority of them use fake trade quotes. The trades they display are remotely not coinciding with what other brokers are providing and the market in general. There is not conformity with most transactions and they seem altered. One thing eminent is that most traders using bucket shop broker is that they lose money regularly. This regularly happens because they engage in fraudulent transactions.
They Use Quotes Which Are Remote
One easiest way to identify a bucket shop broker is to compare the trade quotes they provide and those provided by other brokers in the market. Making this comparison of the quotes, you will realize there is not conformity at all. These brokers simply provide remote trade quotes which are not in line with what other brokers in the market are providing. Similarly, the quotes that they use do not conform to the real market situation. Multiple brokers use currency feeds which you can use to make this comparison. The currency feeds will help you check if their quotes are consistent at any given time frame. Even if lots of traders are following one side of the trader, these brokers decide to provide quotes which are higher or lower than the expected.
Trade Fantasies
Trading fantasies is a general characteristic of illegal Forex brokerage firms. Such brokers use big promises that are certainly beyond the clients' imagination. It is not rare to find brokers that uses ads with enticing lines such as "Easy free money from Forex!", "Make $5,000 a day sitting at home!" etc. This is a general characteristic of bucket shop brokers. Therefore you can use these and any similar ad lines to identify them. What they promise is unrealistic and is usually ended with an exclamation mark. Reason? To ensure that you get the drifts. A genuine and good Forex broker does not need to entice you with fantasies.
Negative Expectancies Trades
One thing very common with these Forex brokers is that they trade on negative expectancies. A bucket shop broker is designed to use negative expectancies to trade against its clients. How possible can they trade against their own clients? One, they serve as strong marker makers and in effect take the side of trade that is against the trader. They have mustered the statistics that reveals a good proportion of traders hold negative expectancies. Keeping this in mind, these brokers look for ways to trade against the losing crowd and thus become profitable at the end. They understands the market very well and what the expectations that traders hold. Trading on negative expectancies also explains why such brokers primarily targets newbies in the market.
No Proper Regulation
It is not a secret that these brokers are not regulated. Quite often, you will find it hard to verify their regulation status or which regulatory authority does that. Regulated brokers will not act in fraudulent trading activities like these brokers do. Ensure that you only deal with regulated broker to be on the safe side.
Conclusion
The Forex market has a good number of bucket shop brokers. You may know little about them but they exist. They are illegal Forex brokers who mainly deal in fraudulent activities and false deception for monetary gain. Take precaution against these Forex brokers and you will save yourself from losing money. The first thing to do is to ensure that your broker is regulated by the right regulatory authority.
Delayed Execution Of Trade Orders
Just as illustrated in the definition, bucket shop Forex brokers delay the execution of customer trade orders. If your broker is not executing your trade orders immediately then chances are that you are using a bucket shop broker. They delay execution of customer orders basically to garner better market position before attempting to execute the orders. Such Forex broker simply holds a customer orders until a point where the trade would be advantageous to their firm. At this point, they can execute your order and gains substantial margin which they keep in form of profit.
Fraudulent Transactions
You will realize that these Forex brokers have long history of fraudulent transactions. Majority of them use fake trade quotes. The trades they display are remotely not coinciding with what other brokers are providing and the market in general. There is not conformity with most transactions and they seem altered. One thing eminent is that most traders using bucket shop broker is that they lose money regularly. This regularly happens because they engage in fraudulent transactions.
They Use Quotes Which Are Remote
One easiest way to identify a bucket shop broker is to compare the trade quotes they provide and those provided by other brokers in the market. Making this comparison of the quotes, you will realize there is not conformity at all. These brokers simply provide remote trade quotes which are not in line with what other brokers in the market are providing. Similarly, the quotes that they use do not conform to the real market situation. Multiple brokers use currency feeds which you can use to make this comparison. The currency feeds will help you check if their quotes are consistent at any given time frame. Even if lots of traders are following one side of the trader, these brokers decide to provide quotes which are higher or lower than the expected.
Trade Fantasies
Trading fantasies is a general characteristic of illegal Forex brokerage firms. Such brokers use big promises that are certainly beyond the clients' imagination. It is not rare to find brokers that uses ads with enticing lines such as "Easy free money from Forex!", "Make $5,000 a day sitting at home!" etc. This is a general characteristic of bucket shop brokers. Therefore you can use these and any similar ad lines to identify them. What they promise is unrealistic and is usually ended with an exclamation mark. Reason? To ensure that you get the drifts. A genuine and good Forex broker does not need to entice you with fantasies.
Negative Expectancies Trades
One thing very common with these Forex brokers is that they trade on negative expectancies. A bucket shop broker is designed to use negative expectancies to trade against its clients. How possible can they trade against their own clients? One, they serve as strong marker makers and in effect take the side of trade that is against the trader. They have mustered the statistics that reveals a good proportion of traders hold negative expectancies. Keeping this in mind, these brokers look for ways to trade against the losing crowd and thus become profitable at the end. They understands the market very well and what the expectations that traders hold. Trading on negative expectancies also explains why such brokers primarily targets newbies in the market.
No Proper Regulation
It is not a secret that these brokers are not regulated. Quite often, you will find it hard to verify their regulation status or which regulatory authority does that. Regulated brokers will not act in fraudulent trading activities like these brokers do. Ensure that you only deal with regulated broker to be on the safe side.
Conclusion
The Forex market has a good number of bucket shop brokers. You may know little about them but they exist. They are illegal Forex brokers who mainly deal in fraudulent activities and false deception for monetary gain. Take precaution against these Forex brokers and you will save yourself from losing money. The first thing to do is to ensure that your broker is regulated by the right regulatory authority.
About the Author:
As you now know how to recognize a bucket shop broker, discover how to select the proper brokerage to do business with at choosing a forex broker. In addition visit the Plus500 review to get a fair analysis of a legitimate online brokerage.
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