The forex exchange market is the largest financial market in terms of trading volume and liquidity. Accordingly, its popularity has skyrocketed in recent years, and an increasing number of people are trading the world’s largest currencies in a bid to make a fortune.
The forex market is a challenging one to master. With that said, it can be a highly profitable and rewarding venture if done right. Many people have successfully learned the rules of trading and how to make good trading decisions. As a result, they are making steady profits trading currencies. If you believe you have the mindset, skills, and necessary experience, you should consider becoming a forex broker.
Simply put, forex brokers buy and sell foreign currencies on behalf of their clients while charging a commission for their service. As a forex broker, you will work as a middle between your client and the market or the interbank system. In return, you will take a slice of the pie whenever you make a trade.
If that is something that interests you, then read on! This article will present you with some essential tips and tools you must have on hand to successfully tap into this exciting and potentially lucrative business opportunity and become a forex broker.
Educate Yourself About the Forex Market
Before you pursue forex trading as a career, you must study the foreign exchange market and currency trading in depth. It is crucial to understand price charts and trading signals, be aware of how to evaluate potential risks and rewards, and lastly, how to conduct technical and fundamental analysis.
Leverage online resources by reading web articles and ebooks to gain a complete understanding of industry practices and modern forex jargon. Only when you have a thorough comprehension of how this business model works can you avoid costly mistakes and help traders decide on and successfully broker their transactions.
Also Read: How to Start with Swing Trading?
Know the Role of a Forex Broker
Do some research and get a feel of the role of a broker in today’s forex trading environment. Join an online Forex discussion group and connect with established forex brokers to discuss the specific requirements of the job and their day-to-day duties. That would give you a good sense of what you can ultimately expect when you set foot in this profession.
Generally speaking, your primary responsibilities will be to open and close new leads, deal with traders in person and over the phone, contact prospects, and nurture existing clients. You will provide a technical analysis of the market situation and guide the investor on the methods. Your main aim would be to help increase the client’s profit and prevent any losses.
Get Your Licenses and Certifications
Each country has its regulations for forex brokers. As for the U.S, the National Futures Association (NFA) is the primary regulatory organization that provides licenses after due diligence to eligible forex brokers.
You will need to clear the National Association of Securities Dealers Series 3 exam before you can become a commodities or futures broker. The test will test your knowledge about futures, options, hedging, market and regulatory rules, and more.
While forex brokers do not need a specialized degree or certification to find a job, completing a certification program can enhance your chances of success and equip you with the skills required to work and excel in this industry.
For example, The International Federation of Technical Analysts (IFTA) offers several courses in technical analysis where you learn to make forecasts, assess the current market situation, and more.
Know What Makes a Good Forex Broker
As a forex broker, you must have a confident and engaging personality. Besides having a passion for the financial markets, the role requires superb communication and interpersonal skills and an analytical mindset. You must also be able to make quick decisions, possess superior numeracy and math skills, and have good risk management skills.
Traders typically favor brokers with fair forex fees and low commissions. You should also offer many currency pairs and a great trading platform with advanced charting. Keeping the trading balance in the investor’s currency would also work in your favor and that of the trader.
For example, investors living in South Africa would prefer forex brokers with ZAR trading accounts, as it would help avoid converting the money into another currency. That would save them currency conversion fees and get the maximum chunk of their profits.
Choose the Best Trading Platform
As a forex broker, you want your clients to feel confident that your trading platform’s software is user-friendly and intuitive, which offers them powerful trading insights that meet their forex trading needs. There are various trading platforms available on the market, with the most popular being MetaTrader4, MT5, and cTrader.
If you are starting with a low budget to invest in, you may consider a White Label solution, and the most reasonable choice client-wise would be MT4 WL. A White Label Solution is perfect for Introducing Brokers (IB), as it allows you to operate under your name without having to buy an entire trading platform, set up servers for the software, and pay the costs associated with it.
Also Read: Top 10 Best Stock Trading Apps in USA
Know the Earning Potential
Forex trading can unlock some serious earning potential for you. While profits depend on several factors like experience level and geographic location, forex brokers typically earn over $65000 in the U.S. Many brokerage firms provide bonuses and commissions too.
Alternatively, you can launch your brokerage firm after gaining a few years of experience, which could dramatically enhance your income potential down the line. With that said, starting a brokerage requires immense time and effort. You must know your charts and tools inside out, possess superior risk tolerance, and gain a complete understanding of the forex market and its unique characteristics.
As for the job outlook, the BLS reports a projected growth of 4% for Securities, Commodities, and Financial Services Sales Agents.
As mentioned earlier, forex trading comes with a set of challenges and carries high risks. Before taking the plunge, you must analyze the potential risks and rewards, assess your risk tolerance and decide whether this business venture is a good fit for you or not.