Investing in currencies and over-the-counter products in the Forex market always attracts individual investors while maintaining the investment dynamics of wealthy institutional investors. Given its popularity and constant demand, the Forex market has become one of the most sought-after investment opportunities for entrepreneurs who plan to start their own business and earn money from the dynamic development of the industry.
Check what the COVID-19 impact on the Forex industry was and how it affected the turnover of Brokers using our MT4 / MT5 White Label solutions.
How to start a Forex Broker?
Launching a Forex brokerage is an attractive business opportunity, and thanks to the White Label Broker model, which is common in the industry, also available to most people. So what is the White Label solution, and why is it so popular in the industry? The White Label solution basically means using a broker license, in the sense of a technological solution, i.e. a fully functional transaction platform with a payment system and access to financial liquidity. Such a Broker is a turnkey solution, ready for launch after completing a few formalities. This solution allows you to run a business under your brand using proven and recognized solutions on the market. All you need is to register a Forex company. The required capital may vary depending on the technology provider and the chosen solution, but it will certainly be much less than the cost of starting a business on your own, starting from scratch.
If you need in-depth information on how to start a Forex Broker business, check out our Guide for FX Brokers, which detail, step by step, all aspects of running a Forex business.
What are the common mistakes made by Forex Brokers?
In theory, everything seems very simple, but new brokerage businesses fail even in times of prosperity; why is this the case?
- 1. No plan on how to get customers
Launching a brokerage business may be fast and easy, but you need clients to make it run. Most novice brokers start offshore because company registration is the cheapest and easiest to obtain. Although they can operate legally, it comes with certain restrictions. An offshore broker cannot officially advertise itself because it does not have a widely recognized license issued to entities offering financial services.
- 2. Lack of knowledge about the possibility of having a company bank account
To accept deposits from traders, the broker must have a bank account; however, international banks will not open a corporate account for an offshore registered entity for the reasons described above. However, this is not the only problem. Most banks with traders will block transfers to the broker’s account
- 3. Finding the cheapest solutions and buying individual elements from different providers
Novice Forex Brokers often forget that they will also be paying monthly fees in addition to the initial setup costs. One provider who makes money on several elements, such as the platform and liquidity, can always offer lower prices than the sum of the expenses you will have to incur for several providers. There may also be additional costs related to integrating various systems and the problem of determining responsibility and quick reaction in case of problems.
- 4. A poorly-considered decision regarding the A-Book or B-Book business model
Choosing a business model is deciding how to provide liquidity for the transactions on the trading platform. The difference between the A-Book and B-Book is easy to describe. A-book income is solely based on spread and commission markups; income is stable but lower than in the second case. B-Book income is based on transactions’ profit and loss balance. The revenue is potentially much higher but at the same time has a much higher risk. One transaction can make the broker fail.
- 5. Choosing the minimum option to save
Forex brokerage can be compared to a car that is enough to drive it with just wheels and an engine, to put it simply. But who will want to drive a slow car without seat belts or opening windows? Clients who invest their funds expect safety and high-quality services. A broker who based their business solely on a White Label platform and manages clients using email confirmations and spreadsheets to keep track of deposits is very unlikely to retain loyal customers.
How to avoid problems and develop Forex brokerage?
Reliable technology is crucial to make your business up and running. Still, you also need a long-term plan and strategic support from an industry-experienced partner to help prepare your business for potential problems that may arise. At Match-Trade Technologies, we do not only sell tools, but we offer comprehensive solutions for brokers. We have many years of experience in the industry, also gained working with the largest Forex Brokers in Europe. We know the industry and business well. We understand what startup brokers need to develop without the risk of overinvesting. We are always up to date with legal regulations worldwide, so we know what problems may arise, and we have solutions that protect our clients from their consequences. Our proprietary payment processor has helped many clients solve the corporate bank account’s problem and has enabled trouble-free deposits and withdrawals from trading accounts for investors. Lately, we’ve also launched a Business Intelligence module in our Client Office and CRM, which, thanks to advanced analytics, allows Brokers to manage business risk to minimize losses effectively.
Consult our experts; we will analyze your situation and plans and recommend adequate solutions. We will help you grow your profits and keep your costs low.