May 2020

What is a Liquidity Provider in Forex Brokerage?

Posted on May 27, 2020January 23, 2023 by James Patrick

One of the most significant elements in the complex world of trading is the existence of the liquid market which opens the path towards many profitable transactions. The Forex trading market falls directly in the middle of this general rule, therefore having greater liquidity in a market makes all of the transactions flow more smoothly and the prices are even more competitive.

Due to the sheer size and volume of the Forex market, the liquidity has absolutely no equal in any other capital market in the world. From only a first glance the foreign exchange market presents a daily transaction volume of over six billion USD.

The liquidity usually can be seen in the exotic, major and minor shared currency pairs, which, to a certain extent, can still experience some liquidity issues usually when unexpected news events appear or important economic data releases shake and stir the market, therefore, causing dealing spreads to widen more than anyone can anticipate.

Liquidity providers explained

A Forex liquidity provider is an individual or an institution that acts exactly like a market maker in the Forex exchange market. A professional market maker is meant to act two roles: as the buyer and as the seller for an asset class or exchange rate to create and ensure equilibrium.
A very important role is played by those who provide liquidity to the Forex market, they are often called liquidity providers and their job is to act on the trading spot as an efficient market marker that makes exchange rates quotations for others. Besides liquidity providers, other market participants are also able to take a significant role in increasing or decreasing the market liquidity by boosting and enhancing the overall trading volume with their own transactions.

What Does Liquidity Mean?

Defining liquidity in the financial and investment market is very simple and it generally refers to the actual reaction speed of an investor, namely, how fast or how slow can their investments be turned into money. For instance, an acquisition or a sale of a certain stock usually takes a longer time to complete, while the usual Forex transaction takes less time to complete which, by far, is much more efficient.
Another solid example of a trading market with a low liquidity value is the home and real estate market mainly because the normal transaction always involves more than three to five days required for the mandatory settlement period to complete, but there are some cases where the real estate transactions take entire years just to complete.
Although there are times when some abnormal liquidity conditions may appear in the foreign exchange market these times are short and disappear fast mainly because the vast majority of transactions are brought to completion very fast.
The huge amount of currency market liquidity enhances the competitive behavior of the participants, therefore, there is a direct influence over the spreads, and stress is placed on the market if it is able to absorb big trading orders without affecting the robustness of the market.

Who Provides Liquidity to the Forex Market?

The notion of liquidity provider is generally used to make reference to a market maker, but, there are several other types of Forex market participants who provide liquidity to the trading market by increasing the volume of transactions, here are some of them:
- Global or central banks;
- Major commercial bank;
- Big investment banks;
- Multinational corporations;
- Hedge funds;
- Foreign investment managers and supervisors;
- Retail Forex Brokers;
- Retail traders;
- Individuals with a high net worth;
Shared currencies and currency pairs usually include market makers, HFT (also known as high-frequency traders) as well as speculators who greatly contribute to liquidity.

The Forex trading market also has a lot of extremely active participants.

Ending thoughts

We need to make sure your clients can legally become forex traders. It is important to clear up the legal matters for each custIt is easy to conclude with the idea that the main role of the liquidity provider is very important because it ensures better price stability by taking solid positions within currency pairs which can be off-balance with another market maker, therefore creating a balance between trades and market participants.omer as soon as possible so that they can get started with the trading process and you can benefit from having multiple traders on your platform.
With fewer traders on your website, it is possible to handle the KYC department on your own, but with time, you will need a professional to review legal documents as quickly and as effectively as possible.
Customer Relation Management (CRM) is a very important part of being a Forex Broker because you are ultimately creating a platform to simplify trading for Forex traders. This is why your clients should be able to get in touch with your team, resolve issues, and get back to trading as soon as possible.
You don’t need a physical office when you just start off but it does help to have an authentic workplace and a smooth customer management team once you start getting more customers.

Here Are 5 Common Problems Faced By First Time Forex Brokers

Posted on May 15, 2020August 26, 2020 by James Patrick

It may be incredibly rewarding to become a broker. When we look at successful individuals out there. We often forget about the problems they may have faced when they started off.

Forex brokers have to face many problems when they set foot on this journey. In this article, we will look at the 5 most common problems faced by novice brokers.

Choosing The Right Forex Broker CRM

If you want to take your brokerage to new levels of success, you must invest in a concrete Customer Relationship Management (CRM) system.
Since many industries require a CRM, there are many software out there. However, we suggest using a CRM system built especially for the Forex industry.
The Customer Relationship Management system should maintain customer forms, grant them permission to trade as soon as possible, it should contain the number of traders, number of trades made, profit and losses. If you are working with Introducing Brokers (IBs) your CRM system must maintain records about them. The number of traders they have introduced to your brokerage, the number of trading accounts they manage etc.
CRMs need careful consideration. We suggest you take time to build your brokerage goals and identity and choose a CRM system that best matches your brokerage requirements.

Choosing the Right Jurisdiction

At the beginning of your Forex Career, you must finalise the place where you want to operate from. This is a tricky decision to make because all jurisdictions are not valued the same way.
Though it is not compulsory for brokers to have a license, all jurisdictions do not allow you to operate without one. Without a license you have fewer opportunities and fewer banks would want to cooperate with you.
Different jurisdictions have different sets of rules and it is not easy to set up a brokerage anywhere you want.
In case you want to get a license before starting your brokerage you need to find the best jurisdictions for a license. Ideally, the best place to start a brokerage is one where you will get maximum trading opportunities, it is easier to set up a brokerage and requires lower upfront costs. Banking options are also important.
Places that require lesser upfront costs often have fewer bankers and traders, while on the other hand, jurisdictions that have higher upfront costs (like getting a license, an office and a CRM) also have maximum trading and banking opportunities. So, it all depends on your budget and time.

Banking Options

Due to the strict Anti-Money Laundering (AML) policies, it has become harder for new brokers to find a banker. The most prosperous places for forex have very strict banking laws. Many banks don’t allow novice brokers to open an account.
This may pose a huge challenge because it is easier to get a license than it is to get a banker. Please don’t stop your research after you choose a jurisdiction, you must check how easy/difficult it is to open a bank account in the designated area as well.

Time

The fourth thing we read about but do not anticipate is time. Yes, we know that it takes time to get a license but really how much time is too much time? And how much time do you have to spare?
A forex license can take anywhere between 2 months to 24 months depending on where you are applying. But time is not limited to your license and setting up a brokerage. It takes time to build a forex website, integrate forex technologies, find a banker, set up an office, hire a manager.
You may have enough resources for an expensive jurisdiction but how long can you handle the upfront costs before making any profit?
Sometimes, as a novice broker, you may have to wait on things you didn’t expect to wait for in the first place. For instance, we discussed how banking may become a problem if you are a first time broker. There may be holdups in web design, technology integration, and even client acquisition.

Marketing

Effective marketing keeps the forex industry running. Since Forex deals closely with money and other liquidities, it’s harder to gain someone’s trust. Clients won’t simply choose you because you own a brokerage.
Many traders choose a broker because they’ve heard favourable responses from other traders. Word of mouth remains the strongest form of marketing in the forex industry.
Finding your first set of traders is harder because there is very little information out there about you. Traders need a good reason to trust you and with the increasing fraud cases in the brokerage industry, traders stay away from new brokers (especially those without a license).
Marketing strategies keep changing every few years so it’s very hard to cling on to a trend and hope for the best. This is why marketing is one of the biggest problems for a new broker. Many brokers have already exhausted a lot of money by the time their brokerage is ready for traders. They just don’t have enough to invest on marketing, and that’s when the office collapses before soaring.
It is very important to build networks even before you become live. If you are a trader transferred broker, start networking with other traders much before you start your own brokerage. If you can create a strong impression, they are much more likely to shift to your brokerage.

So, here are the most common problems faced by a novice forex broker. However, once you embark on this journey and stay on it despite the hurdles, they will be less frequent in the years to come. All the best!

Here Are 4 Must-Have Applications To Make Forex Brokerage Effective

Posted on May 14, 2020August 26, 2020 by James Patrick

As a Forex Broker, you must manage all client accounts, make sure they are eligible to trade, and have a favorable environment for Forex trade. Traders must have easy access to all trading facilities and liquidities available to them.

It is not possible to handle all company processes manually hence you must have a few applications in place. Here are four must-have applications to make Forex brokerage effective.

CRM

The forex brokerage industry has many intricate functions. Managing registration forms, KYC forms for traders, systems, and licenses for Introducing Brokers (IB), etc. A proper customer relationship management (CRM) ap must be in place for all functions to run smoothly.
Many companies need a CRM system, so it is always best to use a CRM system built especially for the Forex industry.
A CRM system from Starting Brokerage, for instance, has been made especially for brokers. It has set recording systems for trading groups, trading accounts, etc. The moment you enter the backend, you’ll know the number of deposits, etc. It allows you to manage your client data better and make sure everyone is benefiting from your environment.

Trading App

Brokers must integrate good trading platforms on their website/phone applications as well. After all, traders associate with brokers because they want to trade and make most of the money they must spare. A good trading app will attract more traders to your platform.
We would suggest integrating more than one trading app on your website so that traders can pick an application of their choice. However, all applications must have some important features in common. For instance, it must teach traders the fundamentals of trading, giving traders access to resources, and, when they are ready, they must have access to the live market, spreadsheets, drawing tools, show real-time price movements, Forex news, etc.
Many brokers provide their traders with MT4 and/or MT5 trading platforms. These platforms are perfect, not just for traders but for brokers as well as allow brokers to view and manage all trading operations.

MT4 & MT5

MetaTrader or MT4 and MT5 are the most popular trading platforms out there. Even the most novice, an inexperienced trader has heard of MT4 and MT5 which is why we suggest having at least one of them, if not both.
MT4 was developed in the year 2000 and it instantly changed the way people trade. It has become user-friendly with years of feedback and development.
They come with interactive charts and a flexible user interface. Traders can customize their interface according to their trading needs. Traders also get many drawing tools to make their own charts.
There is very little difference between MT4 and MT5. Since MT5 is newer it has a few extra tools, but as a trader, MT4 will work just fine.
Brokers benefit from applications like MT4 and MT5 as well. Of course, since most traders use these applications, you can get more clients just by integrating MT4/5 on your website. However, it is more than just providing another trading option, it can extend to a CRM system just for you!

Educational App – Trading Game

When you start your own brokerage, you will have many novice traders who want to exchange commodities. If you can teach a new trader how to trade, they may stick to your platform for life!
Educational apps are helpful as they encourage people to understand the trading industry and make it fun at the same time. This is why we feel you should integrate at least one educational application on your website.
We chose the trading game as one of the most important educational apps for novice traders. It breaks down complex concepts into simpler segments to help most inexperienced traders in the world.
The Trading Game quizzes you at the end of every game. Once you pass the quiz, you progress to the next level. When you pass all the levels you can enter the trading market.

MAM/PAMM

Multi-Account Manager (MAM) or Percentage Allocation Management Module (PAMM) is one and the same applications. It allows brokers to give their clients a little more flexibility.
As we already know that some traders are more experienced than others. MAM or PAMM allows traders to attach money with an expert trader who manages one or more trading accounts.
The experienced trader is granted a limited power of attorney which means that he/she can only use the money for trading purposes and not withdraw funds.
MAM and PAMM allow small traders frequent success rates, and it enables large investors to make bigger investments which are the sum of smaller funds from many traders.
As a broker, having a MAM and PAMM system in place you provide more opportunities to traders and encourage a sense of community. This increases your profits too and provides an incentive for novice traders to join in.

So, here are 4 applications that we feel every broker must-have. This is apart from having a smooth website. All brokers pay a lot of attention to the website quality and speed but when we come to applications, we are at loss.
We hope this list helps you make a better decision for your company!

3 Best Affordable Forex Broker License Jurisdictions Around The World

Posted on May 13, 2020August 26, 2020 by James Patrick

It is true that a Forex license can increase your online and offline presence. But all Forex licenses do not have the same value and are certainly not priced the same way. Different jurisdictions have different opportunities and drawbacks. This is why you should do your research before you apply for a Forex Broker License.

How to choose the jurisdiction for a forex brokerage license

Before we discuss the best jurisdictions around the world, it is also important to know what factors go into picking a jurisdiction. This will help us add more value to the list below.
Four things go into picking a forex broker license jurisdiction, namely:
- Money
- Time
- Banking Options
- Reputation
A cheap license may not always be a good choice. You may apply for it to save money, but the license may be cheap because you might not get the banking solution for that, which is critical now. Hence you must consider all factors before picking a licensing jurisdiction.
Secondly, with so many competitors in the forex market, there are many fraud license providers out there. So, if you get a deal where the license is cheap and easy to get we would suggest you conduct thorough research and check reviews of that place.
Lastly, because of the new and stringent AML policies, many banks don’t allow funds from individuals if you are regulated & do not follow AML policies.
Our experience in this industry has enabled us to compile a list of 3 authentic & affordable jurisdictions to get a forex broker license. Here’s why we think these places are worth your purchase:

1. Seychelles

Seychelles includes more than 113 islands and is located in the Indian Ocean on the east of Africa. Being in the Asian, African region, a license in Seychelles is not as expensive when compared to other jurisdictions like the BVL.
A contract for Difference (CFD) functions are highly regulated in Seychelles but it remains one of the most popular jurisdictions for CFD brokers.
Without a license, there are few opportunities available in Seychelles. However, with a license, you can buy, sell and trade liquidities, manage client investment portfolios, etc.
This license is used by many reputed forex brokers.

2. Mauritius

Mauritius has recently gained a lot of popularity amongst forex brokers largely because of the number of traders, bankers, and investors operating from this area. The license costs are fairly reasonable and they have imposed strict confidentiality laws. Therefore making it one of the safest places for a Forex license.
The best thing about getting a license in Mauritius is that they have a favorable environment for Forex brokers. Fewer taxes are imposed on buying, selling, and trading Forex commodities and there are so many options so choose from.
There aren’t any major drawbacks to getting a license in Mauritius. The waiting time for a Broker license in Mauritius is 6-8 months, which is fairly quick. Once you have a license you can reap the benefits of Forex trade with low taxes.
Many reputed forex brokers got the license in this jurisdiction.

3. Labuan

Labuan is third on our list because it is fairly easy to set up a brokerage in Labuan. Once you are eligible for a license, it would take you 3 – 4 months to get a broker license. However, in order to become eligible, you must take a test and produce documents to prove that you have enough capital to start a Forex Broker in Labuan.
Though it is not compulsory to issue a broker license, it is mandatory for brokers to maintain 300,000 Malaysian Ringgit in all their reserves.
The costs to set up an office and operate as a broker in Labuan is much cheaper than other parts of the world. This is why many novice brokers choose to operate from Labuan. Once you become a broker in Labuan, the opportunities are endless.
The rules and regulations imposed on brokers make it a safe environment to trade. There are enough traders and bankers willing to work with brokers and the taxes on Forex trade is much lower than other countries (approximately 3% of all audited profits).

So, here’s our list of three jurisdictions that we feel are the best for a forex broker license. Licenses in first world countries like the UK, Cyprus & Malta are quite popular. However, they are really difficult to attain and are quite expensive.
The jurisdictions above are unique in their own ways and quite ideal for a first-time broker. Some are more expensive than others while others take a little more time to get in your hands.
At the end of the day, it all comes down to your requirements. What do you need? Do you want to get up and running as soon as possible or do you want to make sure everything is perfect when you cut that ribbon!

How Can Forex Brokers Use Social Media Handles to Their Advantage

Posted on May 12, 2020August 26, 2020 by James Patrick

Social media is the most powerful tool of communication. People can keep in touch with friends and family on social media. But marketers have found an entirely new usage for these handles.

Did you know that 34% of purchases are made on social media? This gives us all the more reasons to be online and among our buyers! Many Millenials trust social media websites more than traditional websites and are happy to conduct payments on them.

However, the purpose of social media is not just to get more purchases. It is to build client-business relationships. In this article, we will talk about how forex brokers can use social media handles to their advantage.

The best way to use social media for forex brokerage is to make sure that you have incorporated all many social media handles in your marketing strategy. Instead of only using social media ads, you need to make use of organic posters as well and vice versa.

Social media marketing is a very strong means for brokers to expand their business and develop new marketing strategies. Here are 5 ways to build your customer base on social media:

1. Networking

The truth is, if you are not on social media you don’t exist. This is not a joke anymore because a social media presence allows you to occupy a small place in the Forex brokerage industry.
Social media accounts allow you to reach out to new people, partake in hot discussions, and resolve queries among novice traders.
Twitter is perhaps one of the best platforms to network and finds new clients. You don’t need followers to be visible and if you tweet many times a day using the right hashtags you will become noticeable. Your Tweets will be valued.
Since it is so inexpensive to use Twitter, many spammers have found a way to trick traders on Twitter.
The only way to fight spammers is to authenticate yourself as a forex broker. Link your website with all your social media accounts and vice versa. Provide genuine advice and give a chance for traders to get to know your business.
Of course, it’s not easy to create a genuine image but if you are consistent on social media, you will become recognized among Forex Traders.

2. Attract Novice Traders

Once a trader finds a brokerage whose platform brought them a lot of success, they are more likely to stick to that broker. We want to be that winning broker for novice traders.
Many people are interested in Foreign exchange but don’t have enough knowledge. You can be that source of information. Blog content, video content, social media discussions, live chats – all of these can help you secure a new client.
Many millennial traders prefer to communicate with forex broker firms on social media. So, having a strong social media presence can attract and retain younger forex traders.

3. Social Media Ads

Apart from organic content, you can also invest in social media ads. Facebook ads are perfect to introduce a new Ferox instrument, a new commodity, or propose an offer that is irresistible for novice traders (like low service tax, free training, and consultancy for the first month, etc).
Before starting the ads you need to conduct thorough research on the places within your jurisdiction that respond well to advertisements. If we want to get the best out of all our ads we must target it towards the places that bring a maximum response.
Lastly, since advertisements redirect customers to your website, it is crucial that you have a fast landing page. We live in an era where everything is fast. We are accustomed to seeing perfection all the time that a slow landing page can easily put us off. If your service does not match up to the ad, potential customers are likely to leave and never come back.

4. Content On Social Media

We have briefly touched on this topic in the earlier sections. Content is a very important aspect of building a social media presence. At the end of the day, we want to help traders reach their potential set of customers.
The best way to do it is to share blog content and video content on social media handles. If you are new and unable to invest in original content, we suggest you share information, from other sources. But as time progresses, it is ideal to build your own content and share them on social media handles. This will increase visibility and secure your position as an authentic broker in the forex industry.
Check the kind of content your competitors are spreading online. Facebook and Twitter allow you to keep a close eye on your competitors without their knowledge. Use it to your advantage and take inspiration from blog posts and posters that have faired well on competitor platforms.

5. Social Media Surveys

Lastly, social media content should be a mixture of what works well and what your customers want. The best thing about social media handles is that if you ask your followers, they would be very happy to tell you what they want!
Polls and surveys allow you to interact with followers, particularly those who are not very vocal about their requirements.
Instagram stories, Facebook, and Twitter are very effective in generating an instant response from your surveys. If done well, you can use this method to understand what your customers want. It can create enough incentive to answer the most frequently asked questions on your blog and youtube channel.
When customers see you conduct surveys and respond to the results they will feel more connected to you and want to stay with you for the long haul.

So, here are some simple social media strategies for Forex brokers. Every customer is unique. You may initially follow trends set by other competitors but as you start posting and interacting with your followers you will find your own voice. That’s when you will become a successful forex broker on social media!

5 Steps To Becoming A Forex Broker

Posted on May 11, 2020August 26, 2020 by James Patrick

So, you have been a Forex trader for a while and now you feel ready to take the next step in the Forex Industry. You want to become a Forex Broker. Well, here are 5 steps to becoming a Forex Broker.

Forex brokerage is gradually on the rise and though more people are entering the Forex industry every year, there is still a lot of potential in the Forex market. You can become an excellent Forex broker and rise above your competition by following the simple steps below:

1. Licensing

Although it is not compulsory to have a license, it greatly improves your chance of building a clientele. Begin by registering your company and get a Forex Brokerage license. The thing is, all licenses are not the same and are definitely not viewed the same way.
However, you can get started as an unregulated broker to start with & then you can proceed to be a regulated broker by getting a license.
Different licenses will give you access to different forex markets and not all markets have the same power.
There is a comprehensive point system in place that allows us to understand the value of each Forex Broker license. For instance, most authoritative brokers will have 100 points. These include licenses obtained from Government agencies. Licenses obtained from financial markets are rated at 50 points and licenses given by market regulators with very little influence are ranked at 10 or below.
The better your license the higher chances you have to be successful in the industry. Clients naturally want to work with the best brokers. However, other factors may also influence your choice of market and licensing.
Conduct thorough research and apply for a license in the jurisdiction that would benefit you the most. Spending time on the licensing process would ensure you are on the right track before you even get started. Since many of your competitors won’t have licenses, starting with a license will make you a better choice among traders

2. Liquidity

Once we have all the instruments we need to get a liquidity service provider in place so that traders can see all the forex commodities that are in the exchange process. Once they place orders it is in our hands to execute orders on time.
Liquidity refers to the amount of money flowing in and out of the market at any given time. Or the number of traders trading in the forex industry as we speak. Traders on your website must be able to track liquidity and currency rates so that they can trade accordingly.
Setting up liquidity is an important process and one that requires a significant amount of research. It enables traders to see prices of different commodities and it also allows you to execute orders as and when you get them.
You must pick a liquidity provider who can efficiently execute orders on time and keep your customers satisfied. The more satisfied they are the more likely to stick to you.

3. Easy - To - Use Trading Platform

In this third step, you get to use your own experience as a trader. Which brokers did you work with in the past and what were they lacking?
Your website must contain your license information, security information, contact forms, easy to access signup forms, account set up methods, payment methods, and a beginner’s guide to Forex Trade.
Though you can hire any designer to build a website, it is ideal to work with a designer who has in-depth knowledge in the forex trade market. A good broker website must provide traders with updated prices. It is impossible to update prices manually hence they should be able to integrate your website with various foreign exchange instruments.
Different brokers provide their traders with different instruments and if you really want to increase your clientele consider including more trading instruments that are not commonly available in your market.
For instance, if your competitors do not provide devices to calculate CFDs, consider being a sole provider. You may have fewer traders using this instrument but since you are the only broker providing it, it gives you a monopoly. Customers that come to you because of your CFD instrument may become your customer for life.

4. Do You Know Your Client (KYC)

We need to make sure your clients can legally become forex traders. It is important to clear up the legal matters for each customer as soon as possible so that they can get started with the trading process and you can benefit from having multiple traders on your platform.
With fewer traders on your website, it is possible to handle the KYC department on your own, but with time, you will need a professional to review legal documents as quickly and as effectively as possible.
Customer Relation Management (CRM) is a very important part of being a Forex Broker because you are ultimately creating a platform to simplify trading for Forex traders. This is why your clients should be able to get in touch with your team, resolve issues, and get back to trading as soon as possible.
You don’t need a physical office when you just start off but it does help to have an authentic workplace and a smooth customer management team once you start getting more customers.

5. Customer Retention

It is true that your highest paying customers will be forex traders for life. You benefit from having them as your customer and it is in your best interest to make sure they remain with you. So the last and perhaps the most important part of becoming a successful Forex Broker is to ensure that your customers remain with you.
If you carefully put in place all the above criteria, it would inadvertently retain customers. Customers understand when you are going out of your way to give them the best service and they would naturally stick to the most trusted broker in the market.
Please provide easy to access phone numbers so that your customers can get in touch with you in case of an emergency. After all, word of mouth is still the most powerful means of marketing. Clients must feel valued for them to stick around and introduce more of their trader friends to your business.

So, here are 5 simple steps to becoming a forex broker. The key here is to make it a fruitful environment for traders to take part in foreign exchange. We wish you all the best to become a forex broker and we hope to hear your success stories very soon.

Month: May 2020