What to expect when opening a Forex brokerage
August 25, 2016
Starting a Forex brokerage should be the result of an extremely rigorous due-diligence process and at the end of it realistic expectations should be set.
The first thing to be taken into account is the fact that being a broker on the Forex market is very tough as competition is one of the fiercest in the world. This industry will eat you alive as a broker if the business is started with the idea that it is easy to succeed. So the one thing to expect is hard competition (not necessarily a loyal competition) from other brokers, and perhaps this is the most important thing of them all.
The reason for that is the fact that this competitive environment is the main cause for being so difficult to attract traders. In order to attract traders/clients, the broker must offer something different than other established brokers (quick access to liquidity, more liquidity providers that will result in lower spreads and more stable prices, etc.) or at least something similar.
Regulation is a plus
Things like being regulated as a broker or offering segregated accounts (meaning traders funds are protected) are so common now among brokers that one cannot succeed if it is not offering basic stuff like these.
What makes a difference between brokers
What makes a difference between brokers is how they treat and nurture clients. This is what really matters when it comes to having a successful brokerage business but this is only the result of a difficult and lengthy process. Expecting an easy road would be a fatal mistake.
At the start of the business, the broker should make sure it is offering great trading conditions (at least matching other broker’s offering in terms of spreads, commissions, execution, rollover slippage, etc.) as well as a user friendly and performance-driven infrastructure.
strong online presence is a must
These days everything is related to the online environment so a strong online presence is a must for any new broker. Having an online presence doesn’t come with automatically attracting clients, so the first thing to do is to make sure traffic is being directed to the website.
Moreover, not any kind of traffic is needed, but the right one, or the relevant one, from people with similar interests. This traffic can be the result of a strong SEO (Search Engine Optimization) and powerful online marketing campaigns.
However, expect this to be a lengthy process as it takes quite some time to attract new clients in this competitive environment like forex trading is.
By the time reputation is slowly but surely being build, the next step is to offer incentives for other people’s to be introducing agents for the newly built brokerage. In order to do that, at least at the beginning the offer should exceed the regular offering from competition, but not to differ much.
track competitors offering
The way to go is to track competitors offering and try to position with similar conditions and if possible offer something new. Attracting new clients and new agents are two very different things but in the end should have the same outcome: transforming the business into a successful one.
Like in any business, building a strong brand should be the result of a mixed policy between powerful marketing and outmost customer satisfaction. These two combined are enough for both gaining new clients and retaining the current ones.
Mastering the two is key for any forex broker and reaching the level when new customers are pouring in and the fleeing rate drops is the ultimate goal. A positive ratio between the two should be the main drive of a successful Forex brokerage.