Are prop firms really bucketshops?

Discussion in 'Prop Firms' started by livermoreorless, Jun 19, 2009.

  1. What evidence do they have they are not???
  2. You can see your orders that you post show up in the LEVEL II so they're clearly not bucketing your trades.
  3. The best evidence would have to be personal experience.

    I have only good experiences. I trade only where I have zero financial risk though. Payout is lower, but I can't complain.

    But I've heard too many times of shops that encourage guys to trade bigger size, just so they get more commission dollars.

    There must also be a distinction between arcades and prop firms. They are different models. The arcade model firms can be aggressive with commissions.

    Firms that ask for any tuition or training fee are very suspicious to me as well.
  4. NazSpaz


    Correct, if they are passing your orders directly to the exchange, they are not a bucket shop. If your orders are being routed to a Knight Trading or other execution firm taking the other side - ie you don't see your orders right away directly in Level 2 - run for the hills.
  5. pspr


    I don't trade FOREX but isn't FOREX just a series of bucket shops? I've never looked at it close enough to see how they determine price levels but I think you are trading against the house.
  6. NazSpaz


    You know, I have always wondered that as well. It probably should be a thread of its own but I cannot figure out with forex if there are ECN-type marketplaces with common prices or if it is a fragmented bucket-shop "not held" type market. Anyone with enlightenment?
  7. There are ECN style forex brokers, the rest are bucketshops. This has been proven and established many, many times in the past.
  8. always amazes me traders will give up almost half their profits and pay large commish because they have no downside.

    like they are going to let you lose any real amount of money.

    give away sizeable upside to protect a small downside risk.

    classic poor trade.
  9. That's funny.

    So you are saying for a newer trader he is better off putting up $5,000+ as initial contribution and probably be encouraged to trade bigger size at those 100% leveraged retail firms. Say the trader has 8 consecutive winning days... or a winning month in general. He may be "fooled by randomness" and think that his performance is due to skill... whereas in reality it could be luck. So with this false confidence of having "skill" a trader with his "sizeable upside" could lose a significant portion of his profits on a handful of bad trades. Maybe completely in general.

    I've personally saw a day trader make several thousand dollars every 8 out of 10 days. And one day he lost $42,000... it cost him a month's profits. I remember exactly the day too.. it was when Rimm had earnings.

    How could you prefer that scenario for a newer trader to one where he has ZERO financial risk? I mean at worst case scenario, if he blows up he doesn't lose a penny. There is nothing wrong with being on a tighter leash... you should trade 100 lots, then 300 lots... and not 200 lots to 1000 lots.

    This reminds of my own personal experience. In November and the beginning December I was killing it relative to the amount of shares I was trading. I only had four losing days. The market was fairly volatile then and my strategy worked great. My boss then tripled my stop-loss and I lost all that profit in January. The market changed...went from being volatile to just trending mostly in one direction. As a newer trader I failed to recognize that. I'm glad I had zero financial risk because if that was my personal money, that really would've dampened my trading future.

    I recommend you read Fooled by Randomness.
  10. so your reasoning is that it is not a better deal because you, " the trader" may do something stupid.

    you think your prop shop is going to let you go down any significant amount of money ? no way. maybe $10k......

    your going to have an extremely tight leash on you based on your p&l and how much money you are making the firm from the "commissions" they back out of your account. oh, and you'll be encouraged to trade volume there also. remember the "gross" angle ?

    so to protect $5k or so, you're going to give away half your profits in the future. make $10k one month and you've nearly given away the $5k your so worried about.

    i've read the book among others. forgotten most of it over the past decade plus that i have been trading profitably for a living.
    #10     Jun 22, 2009