If you’ve been trading forex successfully, you might be interested in launching your own forex trading business. Forex brokerages may indeed be profitable. The international forex industry is the largest and most profitable business, and it is predicted to expand as globalization becomes more and more of a reality.
Thus, forex businesses are relatively stable because economic crises and inconsistencies have little effect on their activity and performance. However, starting a forex brokerage can be risky if you don’t have a set business plan in mind. Here are the steps you need to follow to know how to start a forex brokerage:
FIGURE OUT YOUR TARGET AUDIENCE
One of the first things you need to figure out when starting a forex brokerage is who is going to be the target audience. This is really important as it helps you decide on a couple of different things later such as marketing and pricing. If your target audience is in their 20s or 30s, you might be considering following a more trendy approach to marketing and perhaps using social media to help with it. You may even consider keeping your prices pretty affordable.
However, if you wish to cater to an older audience, perhaps in their 40s, 50s, or even 60s, you may follow a more traditional approach to marketing and you may even be able to set your prices a bit higher.
MAKE A BUDGET PLAN
The next thing to consider when starting a forex brokerage company is your budget plan. You need to know how much funds you’re able to allocate to the business in advance so you can create a clear plan moving forward. It is really important to know your budget as it’ll help you choose your business model later on.
There are some forex brokerage business models that’ll work well with a tighter budget and others that are great for more flexible budgets. Having a set budget in mind will also help you decide on what sort of regulations and licenses you are able to assign to your brokerage.
Having more regulations is great, but it is definitely not cheap.
REGISTER AND LICENSE YOUR COMPANY
Once you’ve got the above steps sorted, it’s time to register and license your company. Not only are you required by law to do so no matter where you reside, but it also helps in improving trust with your potential clients as they’ll be more willing to invest with you if they see that you took the time and energy out to register your brokerage business. This will show them that you actually care about the brokerage and its impression on potential clients.
It is also important to obtain licenses from the financial regulatory bodies of the regions you plan on providing your services. Although this isn’t a necessary step, it definitely helps improve trust with your customers. They’ll be more suspicious that you’ll run away with their investment if you don’t obtain a license from a regulatory body.
CHOOSE A BUSINESS MODEL
As a brokerage service, you have the option of following two possible business models; the A-book model and the B-book model. Following the B-book model would mean that you would be dealing directly with your clients as the market maker. What this means is that you will be providing your own exchange rates and spreads for the clients to trade through. There are no third-party liquidity providers in this forex brokerage business model.
Similarly, following the A-book model would mean that you would be using a third-party liquidity provider to provide exchange rates for your clients. Clients are usually more comfortable with the A-book model. This is because, with the B-book model, they would have the suspicion that the broker would be manipulating the exchange rates in order to benefit from it.
FIND A LIQUIDITY PROVIDER
If you decide to go with the B-book model, you will have to find a liquidity provider. There are two ways to do this. You can either follow the traditional approach or the more modern approach. Following a traditional approach would mean that you would reach out to banks or financial institutions to see if they would be willing to be a liquidity provider for your brokerage.
It would be best to reach out to popular or trustworthy banks as this would in turn increase trust with any potential clients. Following a more modern approach means you’d be using special software that combines a couple of different exchange rates from different places to provide your clients with only the best rates possible.
FIND A PAYMENT PROCESSOR
Once you’ve figured out your liquidity provider, next you need to figure out your payment processors. These are the payment methods through which your clients will be able to deposit and withdraw funds through your brokerage. The more options you provide on your brokerage, the more clients you’ll be able to attract.
It is important to at least have the most basic option available which is bank transfers and credit/debit card payments. However, it’ll be great if you provide additional options such as e-wallets like PayPal, Skrill, and Neteller.
What is also becoming increasingly popular these days is crypto funding. It would be great if you could give them the option of paying through popular cryptos like Bitcoin and Ethereum.
CHOOSE A TRADING PLATFORM
Now that you’ve got a lot of the backend covered, you need to figure out your trading platform. You could either create your own trading platform, or you could provide services through popular third-party platforms like Meta Trader 4, Meta Trader 5, and cTrader.
Creating your own platform may seem pretty great but it’s a ton of work and hiring web and app developers can be really expensive and time-consuming. Besides, potential clients would be more willing to invest with you if you offer a trading platform that they’re familiar with instead of one that you created specifically for your platform.
HIRE A CUSTOMER SUPPORT TEAM
Once you’ve got all the above steps set up, it’s time to hire a customer support team. You should know that since you’ll be getting clients from all over the globe, it only makes sense to hire a very diverse team who can together speak a ton of different languages to cater to the international community. This can significantly help build client relations.
It would even be a plus point if you could offer 24/7 customer support as this would immensely help clients reach you during emergencies.
MARKET YOUR FOREX BROKERAGE BUSINESS
Now that your brokerage is up and running, the final step would be to market it to reach your target audience. You would’ve already decided on your target audience during the first few steps so now, it’s time to finally reach them. You can hire a great marketing team and have them decide on the best marketing tactic for you, depending on who is your target audience.
Once you’ve reached your target audience and successfully had them sign up and invest in your services, you’re finally a successful forex brokerage business.
