In this article we’ll look at how you can start a forex business that isn’t a broker.
Lots of people want to start a forex broker but ultimately realise it is too difficult to do so.
There are a few reasons for that:
- It’s expensive to start and run a forex broker
- The operational side of the business is difficult to manage
- Regulations are increasingly cumbersome
This sounds bad and can leave people feeling disheartened. But it doesn’t have to be.
There are lots of people that run forex businesses today that are not brokers. Instead they supply different services to forex brokers and other companies in the industry.
So if you are interested in starting a forex business that isn’t a broker, read through this article and hopefully you can come up with an idea for yourself.
1. Become a forex broker affiliate or introducing broker
The majority of people that run forex broker businesses tend to be on the marketing and sales side, working as affiliates or introducing brokers. There are a couple of reasons for that.
Brokers are always looking for traders. As a result, there is strong demand for reliable companies or individuals that they can partner with to bring them traders as clients.
From the perspective of someone looking to start a forex broker business, the start up and management costs of running an affiliate or introducing broker business are low. Because you don’t need much money to get started, it’s an easy way to start a forex business for a lot of people.
What’s the difference between a forex broker affiliate and introducing broker?
We have a whole article that explains what the difference is between a forex broker affiliate and an introducing broker, so please read that if you are interested in learning about this topic in more detail.
To keep things simple in this article, just remember there are really three key differences between a forex broker affiliate and an introducing broker
1. How they get paid
Introducing brokers and affiliates are paid in different ways for bringing traders to brokers.
Introducing brokers usually get paid a proportion of the money that a broker makes on the spread. That means as soon as a trader an introducing broker refers to a broker starts trading, the introducing broker will get a proportion of it. Those earnings are usually easy to monitor in real time and can even be paid out on a daily basis.
Forex broker affiliates usually earn money on what is known as a ‘cost per acquisition’ or ‘CPA’ basis.
The way this typically works is that an affiliate refers a trader to a broker. That trader must perform certain actions that will trigger a pay out to the affiliate. Any payouts that have been triggered are usually paid out at the end of the month.
For example, a common set of triggers for an affiliate to receive a CPA fee are for a trader to deposit a minimum amount of money and then undertake a set number of trades of a certain size.
For example, an affiliate CPA deal with a broker might mean that a trader they refer must:
- Sign up to the broker
- Deposit $500
- Undertake a trade where they put down $250 in margin
If the trader undertakes each of these actions then it will trigger a CPA fee that the affiliate receives.
2) How they interact with clients
As a rule of thumb, introducing brokers are more active with their engagement with traders that they get to sign up to a broker. For example, they may physically meet with traders or chat to them on messaging applications, like WhatsApp or Discord.
In contrast, affiliates tend to be more passive and have no engagement with the traders they refer to brokers. For example, a trader may visit an affiliate’s website and sign up to a broker using a link on that website. But there will be no person to person interaction between them.
3) Regulation
This is a very important point and one you must keep in mind if you want to start a forex business as an introducing broker.
In some jurisdictions, an ‘introducing broker’ refers to a regulated role that an individual or firm performs. For example, the UK and US both regulate the introducing broker function. If you are in one of these jurisdictions then be very careful not to undertake introducing broker business without being regulated, as you can face serious repercussions for doing so.
In contrast, affiliates tend to not be regulated and so can be a better option for people looking to start a forex business without investing a huge amount of money.
However, it is worth nothing that in some jurisdictions both affiliates and introducing broker activities are regulated. You must be extremely careful as a result and check whether or not what you are doing falls under financial regulations.
Forex broker affiliate businesses
There are lots of different ways to become a forex broker affiliate, so this list should not be seen as exhaustive.
Fundamentally being an affiliate is about creating an online audience which can be converted into trading clients for a broker. If you can think of a good way to do that which hasn’t been done before, then have a go at it.
In the meantime, here are some common methods that people use to become a forex broker affiliate.
1. Review websites
Forex broker review websites work in quite a simple way. You create a website and publish reviews of different brokers. For example, you might create a rating system and look at brokers’ trading platforms, fees, what assets they offer, or their customer service.
The idea is to both objectively report on how good the broker is but also to highlight what features of the broker you are reviewing that are most likely to be attractive to a given client.
For example, you might note that a broker charges higher commissions but that it also has more assets to trade in and better customer service. As a result, this may be a better broker for a wealthier, more sophisticated client.
The idea is to then convert people that read your review into traders. This is usually done with a ‘sign up’ button that links your affiliate account with the broker. The broker then knows that the client has signed up via your website and will ensure you receive your CPA payouts.
2. Make videos
This is a very simple option. You create a channel on a video publishing platform, which could include YouTube or TikTok. Most affiliates make videos about finance as this means they are catering to an audience with intent and so they are more likely to convert into traders that will become a broker’s clients.
However, you don’t have to do this and other types of content producers have also had success in converting an audience into traders. The thing to remember with this is that you are likely to need a larger audience because conversion rates will probably be lower.
3. News websites
A news website that covers financial markets can be another way to work as an affiliate. The idea is that you draw in current or prospective traders, as they are more likely to be interested in markets and also convert into clients of a broker.
Setting up a market news website is probably the hardest option on this list. It can be very labour intensive and expensive. There are also lots of people doing it, so it’s a competitive sector. This is not to put you off from doing it, just be aware that it may be tough.
As such, you may want to think about catering to a niche. For example, let’s say you want to attract readers in a specific jurisdiction. We can take Kenya as a simple example. If you know a lot about what people in Kenya are interested in when it comes to trading, you can create a market news site that caters to that audience.
Because this is more niche, you are likely to face less competition. Moreover, if there is a broker looking for clients in Kenya, then you are in a much better position to help them compared to other news websites.
Another option may be to start a newsletter. These have enjoyed something of a boom in popularity and are easy to set up using a website like Substack. Again, think about what niche you can cater to here in order to carve out an audience.
4. Be creative
The examples listed here are already popular ways to start a forex broker affiliate business. On the one hand this is good. When people are doing something that means there is money to be made and if you can either do a better job than them or carve out a niche by doing something similar, you will probably be able to do the same.
But that doesn’t mean you have to do one of these options if you want to start a forex broker affiliate business. Be creative. If you can come up with an idea that…
- Generates traffic
- Lets you convert that traffic into broker clients
….then you will be in a good position to make your affiliate business work and potentially become more successful than your peers.
Forex broker introducing broker businesses
Before reading this list it’s worth re-emphasising the fact that acting as an introducing broker is a regulated activity in many regions. Therefore some of the following activities might be impermissible for you to undertake unless you are regulated to do so. If you are not regulated then do not do it!
Another factor to be cognisant of here is that one of the defining features of an introducing broker is the fact they are in communication with clients. This is also an area that can be heavily regulated, so make sure everything you are doing has regulatory approval.
And with that brief intro out of the way, here are some ideas you can use to start a forex broker introducing broker business.
1. Run trading seminars
A common business that people who want to start a forex introducing broker business pursue is to run trading education seminars.
These are live events where you run through, for example, how to use a trading platform, different strategies, or teach people any other information they need to trade in the financial markets.
This can work financially in two ways. One is that you charge money for people to attend the seminar or workshop. You can then also act as an introducer to a broker and generate rebates from the trading activity of the clients you refer.
2. Build an online trading community
This one may sound vague but the simplest way to think about it is as a mix of educational content and providing a way for traders that use your services to communicate with each other.
For example, you may create a website that provides educational content on trading. Again, this is an area where you can double up on revenue, as you can sell that educational content and then make money by referring traders to a broker.
However, you may also add a chat group to that website, where traders can discuss markets and trading ideas with each other. Again, you can double up on revenue here by charging for access to this group.
3. Market PAMM accounts
This one is a bit more complicated and will also require extra due diligence from a regulatory point of view. However, it’s arguably an attractive option.
PAMM stands for percentage allocation management module and it is a way for active investors to attract funds from other people, who don’t want to trade on their own account.
You can act almost like a ‘fund of funds’ manager here by selecting different PAMM trader accounts and marketing those, again within the confines of regulation, to prospective traders.
2. Start a forex trading signals business
Forex trading signals are where you transmit ‘buy’ or ‘sell’ orders in a given asset to either a group or individual traders. You can transmit those orders in different ways. For example, you might use a messaging app like Telegram or plug into a trading platform.
Making money by starting a forex signal business is simple in theory. You create or set up a profile on a platform, say Whatsapp or Discord, which you use to provide trading signals to traders. Those traders pay you to access those signals.
The other part to think about here is how you market this service. Most people sell signals via something like a news website or by creating social media content around trading. Again, this is a competitive industry so you will have to be creative or deliver high quality content to make it work.
The final point to be very careful of here is around regulation. In a lot of jurisdictions, providing signals is not a regulated activity. But in others it can be, depending on how you deliver the signals and the content around them.
We think there are a few areas to be careful of here. One is to make sure that you are not giving financial advice. Pumping out ‘buy’ or ‘sell’ signals and telling traders to take the same positions can easily become financial advice, which is a regulated activity in almost all jurisdictions.
A possible way to think about this is to put balanced signals out and explain why you personally are buying or selling. For example, if you put a ‘buy’ Tesla signal do not say ‘buy Tesla’. Instead say ‘why I am buying Tesla’ with some short, balanced text around why you are taking that position and why you may also be wrong.
Another point to consider is if you are using your signals business to act as an introducing broker. Doing this carries huge risks if you are in the UK and potentially other jurisdictions. This is because you may be breaching regulations that concern setting people up to trade in securities, including FX and CFDs.
We think one option here is to be a bit like a forex broker and tailor your services to clients depending on the country they are based in. If you are based in the UK, for example, and the activity you are engaging in is regulated in the UK, either don’t take clients from the UK or limit the services you provide to those that are unregulated.
3. Start a forex app for traders
If you are someone that has a level of technical expertise or has a business partner that is good at software development, setting up a small forex technology business can be a great option.
To clarify, we are not saying you need to set up a huge company or build a highly complicated trading platform. Instead, try thinking about ideas that are more like ‘add ons’ to existing technology in the forex industry.
For example, in 2022 eToro acquired a company called Bullsheet, which was only set up in 2021. Bullsheet was run by just two people and acted like a plugin for eToro clients, who could use the company’s tools to manage their portfolio on the trading platform.
Another example is Chasing Returns. This was a small start up based in Ireland that used technology to help traders manage their own trading behaviour and improve their decisions. It was ultimately acquired by StoneX, the company that owns brokers City Index and FOREX.com.
Obviously being acquired by a big broker or tech firm is great, but there are other ways that you can start a forex business using technology but with a faster ‘go to market’ strategy. What do we mean by that? We’ll explain now.
Start a forex trading app for the MetaQuotes, Android or iOS stores
Building a trading application is a low cost, simple way to try and start a forex business. You set up an application and charge a fee for people to access the application.
The benefit of doing this is that you can often charge a reasonably large amount of money. For example, the cheapest application currently on page one of the MetaQuotes Store costs $70. The most expensive application is $5,750.
Now imagine building an application that you sell for $200, which generates 1,000 sales per year. That is $200,000 in revenue on an annual basis.
Again, there are no hard and fast rules here but the most popular applications people tend to build when they want to start a forex business are expert advisors, trading signal generators, and trading tools.
What is an expert advisor in forex?
An expert advisor is a trading robot. A user downloads an expert advisor application, typically from the MetaQuotes Store, and then plugs it into their brokerage account. The expert advisor system then executes trades automatically for the person that has bought the application.
What is a trading signal application?
A trading signal application generates ‘buy’ and ‘sell’ signals automatically for the purchaser of the application you have built. The difference between this an expert advisor is that the system does not execute trades.. Another alternative is that the trading signal application is designed for users to generate their own signals by making it simple to set up the parameters they need to do so.
Other trading tool applications you can build
There are lots of other trading applications you can build that can end up being popular with traders. If you are aware of an ‘add on’ or niche that you think would be helpful to traders, and which they would be willing to pay for, then go for it.
The most common tools here tend to be things like portfolio management applications. So things that help traders visualise their exposure to the market and positions they’ve taken. Others might be used to simplify the trading process or automate parts of it.
What to keep in mind
Starting a forex application for traders is, as that implies, about catering to the needs and demands of broker clients. The reason Bullsheet and Chasing Returns were acquired was because the brokers that bought them saw value in the products they made for their clients.
The good thing about this is that trading encompasses a huge number of different activities and so there are lots of tools you can build to help people become better traders or manage their trading activity.
There are also fewer people with technical knowledge. It is comparatively easy, for example, to start a blog or YouTube channel. Building an application is harder and so you will have less competition.
4. Start a forex technology business for brokers
This is possibly the hardest option on our list but has the potential to be the most rewarding from a monetary point of view.
As with trading itself, brokers run complicated businesses and they have to manage a range of activities, whether that be payments, marketing, regulations, sales people, or the risk their dealing desk takes on.
All of these activities have lots of nuances and brokers, as with any business, are always going to be looking for tools that can either bring them more business to grow their revenue or cut their existing costs so they can improve their margins.
Because brokers do so many different things, you have a huge range of options in terms of products or services you can think about providing. The downside is that this can be expensive and these areas often have lots of nuances to them, so this option may be better suited to someone that has actually worked at a broker before.
Some areas that you could think about are…
Regulations
Regulations are increasingly cumbersome and difficult for brokers to meet. They also differ across the globe and, because brokers are often active across many jurisdictions, this creates an additional layer of complexity.
There are two key options here for someone looking to start a forex broker business. One is to become a consultant. Lots of brokers don’t have the capacity to understand all the nuances of different regulations. If you can help with things like company registration, entering local markets, or ensuring regulations are met, then you can charge for those services and be a real asset to a broker.
A more difficult proposition is to build some sort of technology that can reduce the regulatory burden that brokers face. One common piece of technology here has been trade reporting software.
Marketing and sales
The retail forex industry is often a high churn business, meaning brokers always need new clients.
Again, the options here are really two-fold – consulting or technology.
You can provide consulting services to brokers to help them with marketing. The best option here is likely to be if you have expertise on a certain jurisdiction or region. Alternatively if you know a lot about a certain market segment that brokers haven’t exploited, this could also mean you are useful as a marketing or sales consultant.
Dealing desk
Brokers are always looking for tools that enable their dealing desks to either reduce risk or improve the amount of revenue they generate from order flow. This is a complicated field but a lucrative one. Any tool that you can make which genuinely adds value to a broker’s dealing team would likely be an easy sell.
5. Come up with something new
As you have probably worked out by reading this far, there are a huge number of opportunities out there for people that want to start a forex broker business.
The thing is, lots of people end up doing the same sort of thing. Again, if you have a niche or can do what someone else is doing better than they already are, you are in a good position to make some money.
But as that huge range of possibilities show, there are lots of options on the table and things people haven’t tried. So if you can come up with something new, whether that’s a way to bring in clients or a new piece of tech that no one else has created, you will be in a good position to start a forex business.
Good luck!
