Hey guys
I have been trading for the last 8 years, many times I have seen bid/ask fluctuations beyond reasonable rates. Most of the big brokers are MM and they are out to take your money. For 8 months I have been working on starting my own brokerage.
Just wanted to put out a question to traders, would you sign up to a True STP that marks up to 3 pips in spread and charges no commission?
My opinion on spreads is vastly different from most. If a eur/usd or use/jpy is 2 pip or 5 pip if doesn’t really matter to me as I trade on daily and monthly and look at 4 hr for ins and outs. Look at 40-60 pip gains. What is of impotence is huge spreads on news announcements. That is where you can really spot a bucket shop quick. I was starting my own brokerage and have tons of insight that might help. Be prepared to have deep pockets. I would love to help in anyway with what my work has uncovered.
Have a look at the spreads of the brokerages that you might be competing with, that do not charge commissions. Oanda is one of them. Do you think anyone in this day and age would accept a 3 pip markup? As for brokerages being MM that’s out to get our money, well, that is just something that retail forex traders have to put up with. With so much competition in the retail forex trading business, brokerages would not dare to be too daring in pulling tricks to the detriment of their clients. Even though I no longer trade with them, I had mentioned to Oanda a few months ago that I noticed their spreads for the majors were much higher than a few yrs ago when I first started with them, and I’m sure I’m not the only one mentioning it to them. I noticed recently that their spreads for eurusd has dropped to ard 1.2 - 1.4. Thus a 3 pip markup is way too high.
Any experience or real term trader will not mind 3 pips or even more as long as the company is trustworthy, but new comers are likely to fall for attractive stuff like low spreads, so perhaps you have to be good in other department, but if you just try to be simple, it will take too long for you to make a name for your self.
New traders also fall for bonuses…
I would make sure you are giving the clients you are bringing in something of extra value…rebates are big, but education could be huge for newbies… it’s also better if you are just getting cut of the spread from the broker , rather than marking up the spread …you don’t want your clients worse off than the retail clients.
Hi Singh,
take the answer from Karlsen. It covers basically the important aspects you need to know.
The only thing I would add is that if you get 100 customers who understand your honost policy and great service then rather have those and losing 1000 newbies with small account size. Newbies who are not educated will lose their money fast and you will not see much revenue. The experienced customers can trade at your brokerage for many years, thus yielding very nice revenue in the long-term.
I will give a brief account of what I started. With the explosion of fantasy gaming sites I thought it would be a great idea to have a trading spin on the business model. Instead of picking NFL or NHL players and going against other people, I wanted to start a fantasy site where people go into WTI contests or Eur/Usd week long contests. Money is pooled from the players and the top 20% finish in the money. Thats the extremely short version. I had and have real world brokerages on board and I have real world signal and data services on board… now the downside…
Fantasy sports sites are taking a beating in court. My strategic partners and I agree that with the huge money involved from MLB (Draftkings first partners) and huge VC money it should get settled out of court. The initial startup money was and is coming out of MY pocket. The totals for starting a barebones version was coming in around $200k (Canadian dollars as I am in Canada). With fantasy sports you start the website then watch the games... with my site, you make the trades but have to have a brokerage site to watch or go to. To buy was just under $70k usd. To write your own in 1 year and $3.00 usd per line of code. India (where i believe you're from) $.50 usd per line of code. The site i was looking at which is used by many of you now in the form other very large brokers using the same system has 3 million lines of code. So at first blush 70k is a lot cheaper then 1.5-3 millon.
I was looking at completely closing my trading account and still coming up short. I have no problem getting the difference from investors BUT... the ongoing court hearings scare the crap out of me. This budget was for a fantasy site, now factor in real world expenses and the endless legislations required to be involved in dealing with other peoples money. My advice to you Singh is to get with a good firm, learn the skills to be a patient and strong minded trader and go with that.
Good Luck.
Fossil
This is a 9 year old thread, but here we go:
I would. Reasons:
Spread, commission, swap goes hand in hand.
Actual Margin calculation method is also an important factor.
(some brokers promise X leverage, however when you check with an ea, there is no correlation to the leverage used as to how they calculate their margin requirement)
More reasons:
Brokers absolutely ban profitable traders, spend a few hours on forex peace army or any other place and you will find shadier and shadier brokers. They trade against their own customers, meaning they are on the other side of the trade, you win, they lose. Some cite technical issues and deduct profits, some blame it on other things (liquidity provider, or santa clause, some issue for which they could not onboard you anymore therefore cannot offer services anymore.)
14Singh, if you are still around, how far did you get? What did you find out? I would greatly appreciate if you would share your findings, even if they are from 9 years ago.