A business decision needs to be taken with a lot of consideration, and the decision to become the owner of a forex brokerage is not any different. There are many important things to know and consider before taking your first step into the competitive brokerage industry. The traditional route of becoming an independent forex broker is a tough one to travel for an inexperienced beginner. Hence, Forex white label solutions have become a popular option to mark the beginning of a brand new brokerage business in a faster and easier manner.
In this article, you will get to know about the 6 most essential things that you need to consider while starting your own forex brokerage and how White labelling can help you with that.
- Initial Set-up Cost and Ongoing Expenses
Having sufficient capital is the first and foremost thing that you need to tick off before venturing into a new business. Building a forex brokerage from scratch requires a huge amount of capital when you start out on your own. Firstly, you need to build a website and brokerage platform to offer your services to clients. The technological processes can be complex and require a good amount of money as the initial investment. You should also have enough working capital to meet the ongoing expenses for platform maintenance. The most expensive part of setting up a forex brokerage is establishing IT and technological infrastructure along with back-end operations to carry out trading activities on your platform.
Firstly, you will have to integrate a powerful forex trading software with your broker website, and it can be costly. However, the cost and complexity can be minimised to a great extent by choosing an affordable Forex white label solution. Forex white label solutions are provided by top forex brokers. They offer their technological infrastructure to new brokers, allowing them to use this ready-made technology and rebrand it for starting their business. They will use the trading platform of the white label provider and will also be responsible for carrying out all the complex technological processes.
You still need enough capital to meet the initial setup cost and ongoing expenses for platform maintenance. But it is way less than the cost of building a brand-new platform, and you can fully rely on the white label provider for all tech-related concerns. It is more like a lease agreement, as you get to leverage their technology without owning it. While choosing your white label provider, you need to consider the trading software solution they offer along with the platform functionality. MT4 and MT5 are the most popular trading platforms among forex traders.
- Market Access and Liquidity
Acting as a connecting link between online traders and the decentralised currency market is the primary task of a forex broker. No trader can engage in forex trading without a broker as they need the broker to provide them access to the market and real-time price quotes with solid trading conditions. Your future clients will also be expecting you to do the same as their broker. For this, you need to make arrangements for liquidity either by acting as a market maker or functioning as an STP/ECN broker by teaming up with liquidity providers. This can be quite complex and expensive for a beginner.
But when you approach a white label provider, they will be in charge of providing market access to your clients as well. You will not only be using their technology but will also be depending on their liquidity arrangements. So, you need to check these aspects while choosing your white label provider. Traders always look for brokers that provide fast execution of orders without latency or slippage. For this, you need to ensure sufficient liquidity. The trading conditions you can offer also depend on liquidity. Providing favourable trading conditions is important to bring more clients to your platform, as you will be competing with hundreds of brokers. Hence, you must discuss these before signing up with a white label provider.
Another thing to consider while choosing a white label provider is the type of accounts you offer your clients. Most brokers provide their traders with a demo and standard or regular accounts. If you want to provide more options like zero-spread accounts and cent accounts, you will have to find suitable white label providers for that. If you want to offer a specific type of account, like a swap-free account, you will have to choose a white label provider based on that. This helps you to meet the requirements of Muslim traders, thus helping you widen your client base.
- Revenue Generation
Starting a Forex brokerage can be a lucrative venture, and the profit potential that you get by running an online business is also higher. But it’s crucial to understand the scope of revenue generation in this industry. Unlike some businesses, success in the Forex brokerage sector isn’t a guaranteed path to consistent income. The forex market is truly global, and your potential client base is huge, as traders from all over the world can register on your platform. However, your client base will depend on the jurisdiction you choose to operate and how well you market your services.
It would be hard to generate any significant revenue in the initial phase of your business, but it will surely increase over time. However, the revenue a brokerage generates is intricately tied to trading volumes, and the Forex markets are known for their high volatility. This means that during periods of low market activity or economic instability, your brokerage’s revenue may suffer. As such, it’s essential to be prepared for the financial ups and downs of this business and have a robust risk management strategy to mitigate potential losses.
- Extended Working Hours
The concept of working hours in the Forex brokerage world is different from traditional businesses. While the Forex markets operate 24 hours a day, five days a week, your work as a Forex broker won’t be confined to those hours alone. Much of the critical work, including client support, compliance, and administrative tasks, often happens outside market hours. This means you need to be available to handle client inquiries, resolve issues, and ensure the smooth operation of your brokerage, even during weekends and holidays.
You can entrust all these responsibilities to a specialist team, but you need to monitor your business operations on a regular basis. The Forex industry has a demanding schedule, and aspiring brokers should be prepared for this level of commitment. But when you depend on a white label provider, they may help you greatly by sharing their customer support team with you.
- Time
Another thing that you need to consider while starting your own brokerage is that it can be time-consuming. Building a profitable Forex brokerage is far from a get-rich-quick scheme. It takes time to establish a client base, gain a reputation for reliability and integrity, and start generating significant revenue. You will have to keep investing more in marketing as well as in upgrading technology infrastructure as and when needed. Thus, patience and a long-term perspective are essential for success in this business.
One thing you can do to survive the initial phase of business as a new forex broker is minimising the expenses. It will be hard to reduce the operational cost when you start as an independent broker, but you can choose a cost-effective white label solution. With a Forex white label solution, you will be able to launch your brokerage within a few weeks and that too with a simplified procedure and minimal effort on your part.
- Competition
The Forex brokerage industry is fiercely competitive, and you must be prepared to face it. To thrive, you’ll need to differentiate your brokerage by offering unique services, competitive pricing, and excellent customer support. Building a strong brand and reputation is paramount for attracting and retaining clients in this crowded space. It’s essential to recognise that you’ll be competing with seasoned and reputed brokers, and you will have to stand out as a worthy option for traders.
One tip I can give you for finding your footing in this competitive space is starting out as a regulated broker. Being regulated opens more business opportunities for a broker, and a regulated white label provider can help you.
Final Words
Finally, starting a forex brokerage can surely be rewarding for those who have a sound business plan, along with enough patience to wait and withstand the test of time. So, take your time to research and enter the market when you feel ready.