Start Your Own Brokerage for Dummies

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As you know, I was idly perusing the Boston Technologies website the other day when I happened across their very own MetaTrader robot, which seems to have developed an unfortunate habit of losing money rather than making it hand over fist.

I happened across some other interesting stuff over there too, including instructions on how to start your own forex brokerage, with Boston Technologies able assistance of course. Apparently:

Boston Technologies is working with companies such as FXCM, Gain Capital, ODL, Alpari, MIG, Interbank FX, and FXDD to create the most competitive Retail Forex business in the world. We couple the immensely popular MetaTrader4 Platform, our extensive partner network, and our own innovative technology to start organizations off with the right foundation needed to succeed in retail forex.

Like me you might well be wondering why all these "competitive Retail Forex businesses" would want to get into the brokerage business in the first place. Helpfully Boston Technologies also provide an answer to that very question. If you download the "Detailed Business Plan Framework" from that page you will discover all sorts of interesting snippets of information about how forex brokers make money. Various business models are outlined. For "straight through processing" it seems as though:

Rule of thumb calculations show that if [a customer] deposits $10,000 then the broker will make about $1000 in profit over a month if he is active. For an inactive trader he will make $100.

In the "closed loop dealing desk" model however, the broker takes on more risk, but makes bigger profits:

Most small retail customers have no experience and 95% of them WILL lose money.

Here, most customers act like gamblers and your job is to act as the "house".

This is a "non-recurring" customer model in that most customers lose their cash, and do not come back with additional investments. Ongoing customer acquisition is therefore very important.

So there you have it. You now know how the over the counter brokers make their money from forex. The obvious question to ask next is how can you make money from forex? If you still fancy your chances at those odds we humbly suggest that you fill in the little form at the top left of this page, then click the "Sign Up" button. If you don't mind sending us your email address we will periodically send to your inbox all sorts of useful information on how to avoid being amongst the "95% that WILL lose their money".

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Comments on Start Your Own Brokerage for Dummies Leave a Comment

May 26, 2009

Kasia @ 8:28 am #

I love this post. The Black Swan logic. What you don’t know is far more relevant that what you do know.

February 12, 2010

Jon @ 3:02 pm #

Notice that BT is backing the STP model not STP + ECN model.
And that's the rub here. STP still gives room to the brokerage
firms to mark up the spread and not rely on the success of
traders and just take commissions. When BT promotes the
full ECN model, then I will listen to what they have to say.
It is highly questionable when someone promotes you starting
a brokerage firm using their technology no less. Right? They
all make money, including the often sleazy IBs. Note: Dukascopy
lowered the retail minimal deposit requirement and they also
lowered their commission rate. Dukascopy is now the only
brokerage firm worth considering in my opinion for not only
safety but for integrity. And I looked at that always retarded
forex world ea championship or whatever sponsored by FXCM
and BT. The winner is a joke in my view. 145%? And that
deserved a $100,000 prize? Started with $1000 deposit and
it became $1450 in two months. I hope all of us can make $450
in just one or two trades in one 8 hour sitting. Geez. Two months?

March 20, 2012

Brent @ 12:50 pm #

I know BT doesn't support brokerages that have the STP + ECN model, but some brokerages do… Leverate should offer this leverate.com or maybe Integral integral.com.

I would stay away from the "robots" for now… social trading looks more promising than that.

March 21, 2012

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