Caveat Emptor

If caveat emptor means absolutely nothing to you (and it probably doesn’t) it is Latin for “let the buyer beware”. Or in other words, do your due diligence before parting with your money.

In the case of Forex trading, it should be “let the trader beware”. As with any business, there are the good guys (which, fortunately for us, is the majority), but there are also some bad guys – brokers who are in it solely for how much money they can screw out of you. Yes, it happens, even in the Forex market.

These brokers are known as bucket shops – or sometimes bucketeers. It comes from long ago, when this type of broker would put a client’s phoned-in order on a slip of paper, then drop it into a small bucket, rather than execute the trade. If the order is not out in the open market, you would actually be betting against the broker.

Forex bucket shops do not disclose the actual price of the asset that you are trading, so it means they can tell you whatever they want to. They could tell you that the price moved one way or another, or didn’t move at all. In fact, they will tell you whatever is in their favour.

Fortunately, since we now have the internet, and the industry is better regulated, there is less to worry about than there once was, but nonetheless, these bucket shops still exist. If you have any doubts whatsoever about a particular broker, it is well worthwhile checking them out on the forums.

We’ll take a look at some of the Forex scams in your next lesson.