How Bucketstop shops operate

Someone who is privy to an MT4 Forex broker gave me some insider info on the workings of this particular brokerage.

The broker's top dealer said that about +90% of their clients end up with lesser money mid term. This implies that +90% of the clients are losers!

He added that they let their clients "trade freely" within the server. This implies that whatever these clients do, no positions are ever placed/offloaded onto the interbanks; traders are trading against the broker!

He further added that those clients who make money are placed on manual execution. When placed on manual execution, the clients' positions are actually placed into the interbanks or to another broker.

Now you know that 90%+ lose their money, it would be nice to know what these traders are doing at any given time and perhaps we simply GO AGAINST what they do! Heck its already proven they lose money, so if we do the reverse of what they do, we should be making money instead.

FXCM is currently doing just that! They call this SSI - a Contrarian study of their cumulative client's positions. Attached is their Indicator as of Dec 18. last Friday, they published that GBPUSD SSI indicator just flipped over from traders short GU to traders long on GU; true enough, GU started dropping since friday.

For the novices, perhaps you may want to think twice of what position you want to take or do the opposite of it!



PS. The picture presented is not my prediction. It is the SSI indicator from FXCM as of DEC 18.

Very interesting..although you'd obviously have to be with that particular broker as it's going to change with each retailer. Where did you get those figures (the "indicator")?

As FXCM uses a No Dealing Desk all they do is route orders to the banks. A Bucketshop (perhaps you should look up the definition) by name "buckets trades". One cannot do that if all orders are routed outside of the firm meaning that as they are no longer a market maker they cannot influence that. And by the way, all companies (ex. Goldman Sachs) take positions on both sides of the trade. As for the SSI (which is posted online and everyone can see), it is a very useful tool - let's face it most traders are not good at trading. And knowing that a extreme amount are trading in one direction is a pretty good indicator to take the opposite.

FXCM's NDD has been attacked online several times because they do have a dealing desk. They also apparently deal with DB to fill orders, which suppossedly *does* have a dealing desk, so in essence, it's all the same thing.

In reading about it online, there's a number of different articles on this subject - a quick check of google leads one to a wealth of information. My thought on it is this: I don't think there are any forex companies that fail to examine your trades with some sort of oversight. That's just my opinion though.

Yea. Banks don't take contracts less then standard (100,000USD) and even then, they're going to laugh with just one. The average order's around $1-2 mill from an individual from what I've heard.

well, BurgerKing. your trade recommendation on the image. all have been accurate. that broker or bucketshop as you call it, seem to love when people makes money.

Open position long/short ratios, price-distribution of open orders and open positions of Oanda-clients are available for free on their website:

http://fxtrade.oanda.com/

Thanks Shrike for the Oanda's version.

However, I find the FXCM's data more accurate. After all, this SSI is effective because more of FXCM's clients lose money, and by knowing their positions, we'd know how to position ourselves.

But at Oanda, it appears that, the traders are not much of a losers.

http://www.forexfactory.com/showthread.php?t=41992

thx.