The ideal cent broker for small traders
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thread: The ideal cent broker for small traders

  1. #1
    Junior Member johnwix's Avatar
    11

    The ideal cent broker for small traders

    Hi all,

    I am planning to start a brokerage specializing in Foreign Exchange and dealing only with cent accounts. I am wondering what would be terms and the optimal conditions ?
    Please share with details.

    Thanks,

  2. #2
    Junior Member luisokbobt's Avatar
    14
    I really don't want to tell you how to run your company... But if you are planning on setting up an STP brokerage you do not stand to gain (or lose) from b-booking clients' volume/trades that's fine, just understand that that will cut back on your profit margin. On your outline you'd love to maintain transaction costs for clients to a minimum - so maybe you'd love to go out in 1.5 on the EUR/USD? Tighter? As an STP you are going to wind up paying clearing expenses, so maybe you can take home.6-.9 pips per regular lot traded? Now how much volume do you anticipate cent accounts to perform? Let us say clients deposit $50.00 and possibly trade 0.5 lots per month, you are looking at $3-$4 in profit per account. Of course that's a speculative quantity of volume, you are likely to get clients who trade and clients who trade less - I'm just hoping to generate a safe estimate, even with 1:500 or 1:1000 leverage. And who knows, maybe your average deposit will be $500.00, or $5.00 - difficult to understand.

    So with my estimates you are likely to seem to be earning $4.00 per month per $50.00 account. Now in your breakdown you are ALSO likely to offer free VPS for many accounts. That is going to charge you in a minimum $15.00 per month per account depending on who you use as a supplier. You are going to be losing money on accounts directly there. There's a reason a lot of brokers have a $5k minimum account size (FXCM, ThinkForex, FXDD) before they offer free VPS to clients. You want to make withdrawals/funding free. Based on how clients draw, should they do cable withdrawals you are looking at $20-$40 per international wire. If clients fund via credit card, expect a certain percentage to be eaten up by processing fees. Even if a client doesn't withdraw or finance each month it's likely to be a substantial chunk of change which you are going to have to pay for each account when they do draw.

    You want to offer SWAP free accounts - OK which COULD go either way, but chances are you're attract heavy carry-traders taking the opposite side of a commerce since you are going to be showing no SWAP. Most brokers charge a 100 bp distribute on SWAP irrespective of direction and can make at least a few $$ from client SWAP but if you are not likely to charge/pay SWAP you'll find people to benefit from that.

    Regarding your choice of trading platform: I really don't blame you for not wanting to go with MT4 - HOWEVER, it's the most popular platform out there and also the simplest way to attract clients. In the event that you were to go with cTrader you are looking at a $25,000 one-time setup fee then ~$4 per mil traded in additional monthly costs depending on volume. If you re-consider MT4 you are looking at $50k upfront and ~$1,500 per month in service charges irrespective of volume.

    If I were you I'd look into getting setup as a white label of a broker with these offerings. An MT4 white label is simply going to set you back $5k up front and $750 per month and if you hit a fantastic deal with a broker they may pick up some of those charges.

    How many clients can you realistically attain? 100? 1,000? 10,000? How much are they likely to deposit? Your up front costs are going to be expensive, your monthly costs I'm afraid are likely to reevaluate the income you're going to be getting from $10 - $100 accounts... Again, I don't want to tell you how to conduct your company, I simply don't see a way to make your offering profitable with what you are proposing.

  3. #3
    Junior Member luisokbobt's Avatar
    14
    Men who exchange cent accounts need everything guys who exchange $500,000 accounts get... Low spreads, flawless execution, multiple platforms, STP processing, free cable transfers, higher leverage, 24 hour service, low/no slippage, no cost VPS, etc..

    The problem is, for brokers cent accounts generate literally pennies in profit each month and use it more as a marketing tool / cost-per-acquistion scheme moreso than an authentic profit-generating venture. Some brokers who take those account seriously often have unbelievably broad spreads (for cent accounts) so that they could at least break-even on servicing those accounts. I still can't get my head around traders who wish to deposit $25.00 to a broker, and end up paying $30.00 in cable fees!

    Really, allow me to explain that first sentence. Men who exchange cent accounts feel entitled to find everything guys who exchange 500,000 accounts get. The mindset of traders with cent accounts can be mind-blowing...

  4. #4
    Junior Member johnwix's Avatar
    11
    What is on the surface of your listing / Everything you expect to get for these products:
    1- Price of trade
    two - Transparency
    3-Customer service
    4- Speed of execution
    5-Trading Platform
    6- Depositing and Withdrawal
    7-Regulation/Regiion
    8- Hedging
    9-Scalping/aggressive scalping
    10-EA environment
    11-Bonus/contest/etc
    12-Affiliated Forum to brokerage
    13-Eduion resources
    14-Physical Loion of Brokerage
    15-Market maker/ECN/DMA/STP
    16-Automated trading
    17-Website seem
    18-Leverage
    19-Order type flexibility eg. OCO, One click, etc..
    20-API trading: FIX, JAVA, C#, etc..
    21- Number of instruments available
    22-MAM
    23-SWAP free


    I think everyone has its own preference. But I am wondering what are the most important ones are crucial for any cent trader? Which are the ones which can make this brokerage above all other Cent brokers? Which are the ones that draw the most of cent traders? PLZ share

  5. #5
    Junior Member johnwix's Avatar
    11
    Guys who exchange cent accounts want everything men who exchange with $500,000 accounts get... Low spreads, flawless execution, multiple platforms, STP processing, free cable transfers, higher leverage, 24 hour support, low/no slippage, free VPS, etc..

    The problem is, for brokers cent accounts generate literally pennies in profit each month and use it more as a marketing instrument / cost-per-acquistion scheme moreso than an authentic profit-generating venture. Some brokers who take those account seriously frequently have unbelievably wide spreads (for cent accounts)...
    obtained your point. Nevertheless suppose I am from those brokers who want to generate pennies in profit ( first group), if you are on the investor/Broker side what would you believe are essential to generate those minute profits but from myriad traders? To put it differently, you suggest the issue. . Now could you share what exactly do you think it would be the practical solution from your point of view?

    Thank you for sharing. I am highly appreciative

  6. #6
    Junior Member johnwix's Avatar
    11
    My initial thoughts are as follows:
    1- Cost of transaction -- gt; the very best
    2- Transparency -- great
    3-Customer service-- friendly and honest
    4- Rate of implementation -- the very best
    5-Trading Platform-- Not MT4 ( might be M4 or cTrader). But , it will backed to guarantee conversion of EAs.
    6- Depositing and Withdrawal-- FREE and effortless
    7-Regulation/Regiion-- Not regulated
    8- Hedging-- Not Allawable
    9-Scalping/aggressive scalping-- allowable
    10-EA surroundings -- All are allowable such as martingale and gridding
    11-Bonus/contest/etc -- I'm not certain yet
    12-Affiliated Forum to brokerage -- Later I would include
    13-Eduion resources-- Yes from the beginning
    14-Physical Loion of Brokerage-- Not certain yet
    15-Market maker/ECN/DMA/STP-- STP
    16-Automated trading-- YES
    17-Website seem -- YES
    18-Leverage-- for as much as 100$ deposit, will be up to 1:1000 based on trader choice. . Above 100 will decrease leverage to half.
    19-Order type flexibility eg. OCO, One click, etc.. -- YES
    20-API trading: FIX, JAVA, C#, etc.. -- Not in the start
    21- Number of tools available--All major
    22-MAM-- Not in the start
    23-SWAP free-- YES
    24- VPS-- YES and FREE for most actual accounts beginning from 1$ deposit.
    25- Mimimum lot size-- 10$
    26- Max number of open trades --no limitation


    Now what do you think about this egy. . Is this enough to entice cent traders and make them happy? What is missing? What is over estimated? What is under estimated? What is from estimation?

  7. #7
    Junior Member johnwix's Avatar
    11
    How many clients can you realistically achieve? 100? 1,000? 10,000? How much are they likely to deposit? Your up front costs are going to be pricey, your monthly costs I am afraid are likely to reevaluate the income you're going to be getting from $10 - $100 accounts... Again, I do not want to inform you just how you can run your business, I just don't see a way to earn your offering profitable with everything you're proposing.
    Great. . Thank you.
    HoweverI think to estimate the anticipated average profits that could be generated from ordinary projected account, would be difficult. I concur with you on that. Therefore, I'm inclined more to calculate/estimate the cost I have to bear for every account. You mentioned two great points regarding the cost; VPS and cost. For the VPS, I believe I could start this VPS by my own using different choices to reduce cost from 15 to 7 or less per month per account. Using Wholesale Leasing or, using second-hand eBay Servers affordable virtualization software affordable T1 lines. . I could reach this 7$/m area. I really like to provide this VPS service for all actual accounts is one of my big ches.
    Regarding the Deposit/Withdrawal cost, I can review my proposition to make it attractive for traders but maybe not that costly for me. eg. Making withdrawal cost, depositing on my cost. . Searching for the most economical ways of sending cash would be essential to achieve a fair but plausible arena.
    SWAP free could be a choice and I want to determine how to cancel its arbitrage risk. For me listen to this 10, thank you.
    Regarding the trading platform, I'm likely more to M4. It requires less installation fee and it's C# so for the benefit of the trader to get more tools. I understand the challenge to select a platform other. I really do not like MT4 and I believe when I include a programming service, economical and effective affiliated to the brokerage, this might work out. Especially, to get a total control on MT4 you want 100k for private license. I believe this is not viable option for me. Leasing MT4 or WL, would reduce my control over my brokerage dramatically.

    Finally, this version of business is based upon the integration of my market maker algo trader that could provide liquidity and simultaneously commerce. The total trading volume of my brokerage will include the trading volume of my algo along with my clients. So, I hope in the first period after beginning, my quantity will be mainly achieved by my own algo. This percentage is predicted to reduce with more clients commerce and demand.

  8. #8
    Junior Member johnwix's Avatar
    11
    In Oanda, it is possible to trade starting from 1 up unit to 10mln with exactly the very same capabilities.

    I'm wondering, what makes Oanda attractive for small traders over additional penny brokers? What still Oanda should become the ideal environment for small traders?

  9. #9
    Member xwta's Avatar
    35
    I trade with oanda due:
    1 low spreads.
    2 the capacity to position size with components.

  10. #10
    Junior Member johnwix's Avatar
    11
    I exchange with oanda because:
    1 reduced spreads.
    2 the capacity to position dimensions with units.
    The low spread could be attained with many other competitive ECNs and I concur with you that positioning with units is a winner for Oanda.

    But what do you think you still need in Oanda? . Some Oanda traders wish cheaper and much more favorable API trading to automate. Other folks want to hook their third party platforms such as NT, MC, etc.. Some complains of huge spikes during news...

    What do you think you wish most? What do you really think you hate most in Oanda?

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