A forex broker is a financial services firm that offers its clients the ability to trade foreign currencies. Forex is short for foreign exchange.
Table of contents
Once market and target group is defined, creating a strategy should be a next step. Strategy should incorporate many aspects but Marketing, Client offer and Risk management would be the key points. Marketing How is the target group going to be reached?
Considering the costs offline strategies might not work in certain countries, while in others this will be the main way to reach your local community. Sometimes it might be enough to do marketing to your existing client group, while in other cases a branding campaign is necessary so that potential clients start recognizing your trademark before they are approached by sales. The more detailed the strategy the easier it is later, so defining specific media and research on their prices is important.
What is Forex?
Also plans about creation of websites, landing pages, gadgets and promotions should be taken into account. Client offer While reaching the customer is important, you also need to know what your target group will be offered. Will they trade on a few instruments or will they appreciate a whole array of them? Will they want to trade on fixed or floating spreads?
It is good to do a market comparison with competitors and check their spreads and quality of execution. The same applies to any affiliates you might need to approach. Rebates for introduction need to be defined and conditions to get them to protect you from unfair business partners.
Risk management One of the most important issues is how you are going to make money and what type of risk will the brokerage take. There are as many risk management practices, as there are brokers on the market. The most well known are full A book and full B book, but hybrids are usually the most common. These hybrids allow you to take the most from the potential of the market. In this case not only your risk appetite needs to be taken into account. Defining your client groups, their experience, your cash levels should also take place.
The Role of a Forex Brokerage
It might also be worth considering to take one approach in the beginning when risk is not what you seek while starting a new venture, while gradually taking on additional risk when developing the enterprise. How to regulate your business is one of those questions that should be asked multiple times before answering. While strategy, providers and target groups can be changed relatively easily, choosing a jurisdiction is like marriage and it will never be easy to change your spouse.
Our team is continually working on the mobile and desktop versions of our platform. In the latest releases, we have introduced a couple of useful front and backend features. See […]. One of the biggest legislative initiative of this year took place during last week with the newest ESMA proposals to introduce new regulations on OTC market. Restriction consists of leverage […]. Back How to set up an online Forex Brokerage house? Choose the right people It is the most important thing to start with — who will be doing this? Choose your market and target group In theory it is enough to prepare a good PPC campaign pay-per-click , put enough budget from a credit card and let it go.
BUY a currency pair if you believe that the base currency will strengthen against the quote currency, or the quote currency will weaken against the base currency. SELL a currency pair if you believe that the value of the currency pair will decrease — meaning the base currency will weaken in value against the quote currency, or the quote currency will strengthen against the base currency. The spread is the difference between the buy and sell prices of a forex pair. The difference between them is the spread, which covers the cost of the trade. Risk management is crucial for successful forex trading — and a key element of risk management is the use of orders.
There are two main types of order: stop loss orders and take profit orders sometimes called a limit. Both act as instructions to automatically close a position when its price reaches a specific level predetermined by you. A stop loss order is an instruction to close out a trade at a price worse than the current market level and, as the name suggests, is used to help minimise losses. There are three types of stop loss orders: standard, trailing and guaranteed. A standard stop loss order , once triggered, closes the trade at the best available price.
There is a risk therefore that the closing price could be different from the order level if market prices gap. A guaranteed stop loss however, for which a small premium is charged upon trigger, guarantees to close your trade at the stop loss level you have determined, regardless of any market gapping. A limit order or take profit is an instruction to close out a trade at a price that is better than the current market level and is used to help lock in price targets. Standard stop losses and limit orders are free to place and can be implemented in the dealing ticket when you first place your trade, and you can also attach orders to existing open positions.
Learn more about risk management here. When you are ready to close your trade, you do the opposite to the opening trade. By closing the trade, your net open profit and loss will be realised and immediately reflected in your account cash balance. To read more about this please visit our help and support section. One important aspect of trading currencies is learning what affects their prices.
Remember, forex pair prices will move based on the relative strengths of both currencies — so keep an eye out for any developments that might move either the base or the quote when trading. Inflation, unemployment numbers, payrolls or other key economic data can often have a major impact on forex prices. Central banks buy and sell large amounts of their own currency, attempting to keep it within a certain level.
They also set interest rates and dictate money flow, which will have a big influence on exchange rates. The forex market is regulated by several different governmental and independent bodies all around the world. Some of these include:. These bodies set the standards by which every forex broker must comply, which helps ensure that currency trading is ethical and fair. That makes it the biggest financial market in the world by volume — by some distance.
- Foreign exchange broker - Kantox?
- Forex Broker?
- niche binary options.
- real stock options.
- margin trading options.
- What is Forex Trading?!
- Best Forex Brokers 2021.
That makes forex more than 20 times bigger. Gaps in forex trading are when a market moves from one price to another without any trading in between. They occur most often over the weekend — a market may close at one price on Friday, then open higher or lower the following Monday. Forex trading can be taxable or tax free in the UK — it depends on how you speculate on currencies.
Navigation menu
Spread betting profits are free from tax for amateur traders, while any profits from spot FX or CFDs are not. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary. We use cookies, and by continuing to use this site or clicking "Agree" you agree to their use. Full details are in our Cookie Policy. Create Account Demo Account. Get started below, or jump ahead to a section: How currency markets work How to start trading forex Forex pair categories What moves forex markets Forex FAQs How do currency markets work?
Next chapter Forex examples. You might also be interested in Pricing and Charges View spreads, margins and commissions for City Index products. Trading platforms Take control of your trading with powerful platforms and tools. Economic calendar View upcoming trading opportunities for the weeks ahead. Test drive a trading account Trade Forex risk-free with a demo account.
Spot FX is traded in lots, in the unit of the base currency.