How a brokerage starts?
As we all know, at the heart of any brokerage lies the trading platform. It is an important and integral part of any brokerage company. Today there is a plenty of trading platforms on the market: MetaTrader4 and MetaTrader5 by MetaQuotes, cTrader by SpotWare, Tradable by Tradable ApS, just to name a few. Some companies are developing their own trading platforms, but I’ll concentrate on the example of the most popular platform among brokers and traders - MetaTrader4 or MT4. The numbers speak for themselves- over 300 brokers provide MT4 to millions of traders. In general, all the following information can be applied to any other trading platform, but their specific features should be taken into account. I'll be glad to talk in more details about other trading platforms, if you will be interested.
What is actually the trading platform? In simple language it’s a software package that is responsible for processing and execution of all trades of brokerage clients’ and processing of all related payments. In other words, if there were no trading platform, there would be no trade possible.
But let’s get back to MetaTrade4. The main reason of its success, in my opinion, is that it was the first trading platform providing simplicity and clarity for the retail traders. This is due to the fact that many platforms of the past, as well as some of the modern ones were based on the stock market trading platforms or platforms for large institutional clients that are normally not the perfect fit for the retail sector.
Therefore, since its release MetaTrader4 was actively gaining the market share and this, in its turn, led to the development of large infrastructure around it. Today, MT4 retains its popularity due to the huge community and a lot of related content created by the industry. Here, I primarily mean traders education services, millions of indicators, scripts and expert advisors based on different trading strategies and, secondly, the variety of server additions and modifications used by brokers. Just imagine the scope of MT4-related services offered to different stakeholders: traders, retail and institutional brokers. Tool for Brokers Inc. alone provides more than 150 ready-made solutions for brokers and permanently gets new requests for custom developments for MT4. So, now you can roughly estimate sizes of MT4 infrastructure and its significance for the entire Forex industry.
Basically, all the aforementioned things bring us to the first tip that I would like to give to all current and future brokerage companies: when choosing a trading platform, learn its infrastructure, community and popularity among traders, since it is the number of traders to determine the success of your business. If you are a broker in its infancy, I would not recommend you to start with any innovative, but yet unexplored platform with a small community around it. Such platforms are good to launch at the stage when you have already accumulated sufficient client base and can offer them something new that might interest them.
Remember, that economizing and cutting back expenses on the initial stage, namely, platform acquisition will turn against you, probably, you will not even be able to start working, because promoting something new and unfamiliar usually requires much more expenses than buying a platform. So don’t be penny wise and pound foolish!