Retail Forex Brokerage is one of the few financial services sectors that still sees constant growth year after year. That growth has endured in spite of increased regulations around the world and adds reluctance from Institutions in dealing with Retail Forex Brokerage. There are varying levels of participation in Retail Forex.
The most basic level would be as an affiliate partner. Affiliates are those individuals that have a following either through a blog or educational website. Some affiliates do not even have a website but instead use a Facebook group and communicate with their followers there. Getting started as an affiliate in retail Forex usually just requires some basic information like name, email and how you would like to get paid. Affiliate programs are very popular because for the brokers and for the affiliates, it is pretty hands off. The affiliate is given a dedicated link and some banners when their client’s click are then tracked all the way through to the broker’s website. Most brokers offer a back office to the affiliates where they can monitor traffic and signups and see what their payouts look like. Payouts for affiliates are usually based on a CPA level. Some brokers will pay as much as hundreds of dollars for an open and funded account.
We have all heard the statistics that over 70% of Retail Forex Traders lose money. So what happens to those traders that lose? Some of them look to a Forex Money Managers to have someone with a track record trade on their behalf. In many cases, Forex Money Managers emerge after a trader sees that the system they are using seems to be working or they have developed and Expert Advisor that works and they want to exploit this. Forex Money Managers have a POA or power of attorney agreement with their clients and the broker. In most cases, the deal with the money manager is primarily an incentive deal where the money manager will share in the profits with their clients. What that percentage usually depends on the success and how much the money manager is in demand. Being a Forex Money Manager has its advantages. Forex Traders get to do what they have always done but now have more resources. Money Managers have their interest aligned with that of their clients. If their client doesn’t make money neither do they.
The Introducing Broker is one of the highest levels of participation in retail forex brokerage without actually being the broker. An Introducing Broker serves a very important function for both the clients and for the Forex Broker. In many cases, they offer services in a native language that is not offered by the broker and helps the customer better understand important information like regulatory requirements for certain documentation and why brokers have rules on things like third party deposits. In many cases, the Introducing Broker may also offer a product and service that may benefit or educate the clients. The compensation they receive from the Forex Broker is one way to make sure that these services will continue to be offered.
Trading Forex and Derivatives carries a high level of risk, including the risk of losing substantially more than your initial investment. Also, you do not own or have any rights to the underlying assets. The effect of leverage is that both gains and losses are magnified. You should only trade if you can afford to carry these risks. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary