The ideal cent broker for small traders

Hi all,

I am planning to start a brokerage specializing in forex and dealing only with cent accounts. I am wondering what are the optimal conditions and terms you guys think they must be included?
Please share with details.

Thanks,

Guys who trade cent accounts want everything guys who trade with $500,000+ accounts get... Low spreads, flawless execution, multiple platforms, STP processing, free wire transfers, high 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 tool / cost-per-acquistion scheme moreso than a true profit-generating venture. Some brokers who take those account seriously often have incredibly wide spreads (for cent accounts) so they can at least break-even on servicing those accounts. I still can't get my head around "traders" who want to deposit $25.00 to a broker, and then end up paying $30.00 in wire fees!

Actually, let me clarify that first sentence. Guys who trade cent accounts feel entitled to get everything guys who trade $500,000+ accounts get. The mindset of traders with cent accounts can be mind-blowing...

What is on the top of your list/ What you expect to get for these items:
1- Cost of transaction
2- Transparency
3-Customer service
4- Speed of execution
5-Trading Platform
6- Depositing and Withdrawal
7-Regulation/Registration
8- Hedging
9-Scalping/aggressive scalping
10-EA environment
11-Bonus/contest/etc
12-Affiliated Forum to brokerage
13-Education resources
14-Physical Location of Brokerage
15-Market maker/ECN/DMA/STP
16-Automated trading
17-Website look
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 believe everyone has its own taste. But i am wondering what are the most important ones are essential for any cent trader? What are the ones that will make this brokerage above all other Cent brokers? What are the ones that attract the most of cent traders? PLZ share

Got your point. However suppose i am from those brokers who want to generate pennies in profit ( first group), if you are on the investor/Broker side what do you think are necessary to generate those minute profits but from myriad traders? In other words, you propose the problem .. now could you share what do you think it would be the practical solution from your point of view?

Thanks for sharing. I am highly appreciative

My initial thoughts are as follows:
1- Cost of transaction --- > the best
2- Transparency ----> great
3-Customer service----> friendly and honest
4- Speed of execution----> the best
5-Trading Platform---> Not MT4 ( might be M4 or cTrader). However, it will backed with a very good programming cheap service to ensure easy conversion of EAs from MT4.
6- Depositing and Withdrawal----> FREE and EASY
7-Regulation/Registration---> Not regulated
8- Hedging---> Not Allawable
9-Scalping/aggressive scalping----> allowable
10-EA environment---> All are allowable including martingale and gridding
11-Bonus/contest/etc ----> I am not sure yet
12-Affiliated Forum to brokerage ---> Later i would include
13-Education resources---> Yes and from the beginning
14-Physical Location of Brokerage---> Not sure yet
15-Market maker/ECN/DMA/STP---> STP
16-Automated trading---> YES
17-Website look----> YES
18-Leverage----> for up to 100$ deposit, will be up to 1:1000 according to trader choice.. Above 100$, will decrease leverage to half.
19-Order type flexibility eg. OCO, One click, etc..---> YES
20-API trading: FIX, JAVA, C#, etc..----> Not at the beginning
21- Number of instruments available---->All major
22-MAM---> Not at the beginning
23-SWAP free----> YES
24- VPS-----> YES and FREE for all real accounts starting from 1$ deposit.
25- Mimimum lot size---> 10$
26- Max number of open trades --->no limit


Now what do you think about this plan.. Is this enough to attract cent traders and make them happy? What is missing? What is over estimated? what is under estimated? what is out of estimation?

I don't want to tell you how to run your business... But if you're planning on setting up an STP brokerage you do not stand to gain (or lose) from b-booking clients' volume/trades which is fine, just know that that will probably cut down on your profit margin. In your outline you'd like to keep transaction costs for clients to a minimum - so maybe you'd like to go out at 1.5 on the EUR/USD? Tighter? As an STP you'll end up paying clearing costs, so maybe you can take home .6-.9 pips per standard lot traded? Now how much volume do you expect cent accounts to do? Let's say clients deposit $50.00 and maybe trade 0.5 lots per month, you're looking at $3-$4 in profit per account. Of course that's a speculative amount of volume, you're going to have clients who trade more and clients who trade less - I'm just trying to make 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 - hard to know.

So with my estimates you're going to look to be making $4.00 per month per $50.00 account. Now in your breakdown you're ALSO going to offer free VPS for all accounts. That's going to cost you at a minimum $15.00 per month per account depending on who you use as a provider. You'll be losing money on accounts right 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. Now you also want to make withdrawals/funding free. Depending on how clients withdraw, if they do wire withdrawals you're looking at $20-$40 per international wire. If clients fund via credit card, expect a certain percentage to be eaten up by processing charges. Even if a client doesn't withdraw or fund each month it's going to be a significant chunk of change that you'll have to pay for each account when they do withdraw.

Now you also want to offer SWAP free accounts - OK that COULD go both ways, but chances are you'll attract heavy carry-traders taking the opposite side of a trade since you'll be showing no SWAP. Most brokers charge a 100+bp spread on SWAP regardless of direction and can make at least a few $$ off of client SWAP but if you're not going to charge/pay SWAP you WILL find people to take advantage of that.

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

If I were you I would look into getting setup as a white label of a broker with these offerings. An MT4 white label is only going to set you back $5k up front and $750 per month and if you strike a good deal with a broker they might pick up some of those fees.

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

Great.. First, thank you for sharing your thoughts.
However, I think to estimate the expected average profits that could be generated from average estimated account, would be difficult. I agree with you on that. Thus, I am inclined more to calculate/estimate the cost I have to bear for each account. You mentioned two great points regarding the cost; VPS and depositing/withdrawal cost. For the VPS, I think I could start this VPS by my own using different options to decrease cost from 15 to 7 or less per month per account. Using Wholesale reselling or , using second-hand eBay Servers +cheap virtualization software+ affordable T1 lines.. I could reach to this 7$/m area. I feel to provide this VPS service for all real accounts is one of my big catches.
Regarding the Deposit/Withdrawal cost, I can review my proposal to make it attractive for traders but not that costly for me. eg. Making withdrawal on client cost, depositing on my cost.. Searching for the most affordable ways of sending money would be necessary to reach a fair but plausible arena.
SWAP free could be an option and I need to figure out how to offset its arbitrage risk. Thank you for get me pay attention to this point.
Regarding the trading platform, I am inclined more to M4. It requires less setup fee and it is C# so for the benefit of the trader to have more tools. I understand the challenge to choose a platform other than MT4. I really do not like MT4 and I believe if I include a programming service, cheap and effective affiliated to the brokerage, this might work out. Especially, to get a total control on MT4 you need +100k for private license. I think this is not viable option for me. WL or renting MT4, would decrease my control over my brokerage dramatically.

Finally, this model of business is based upon the integration of my market maker algo trader that could provide liquidity and simultaneously trade. The total trading volume of my brokerage will include the trading volume of my algo and my clients. So, I am expecting in the first period after starting, my volume will be mainly done by my algo. This percentage is expected to decrease with more clients involve and trade.

In Oanda, you can trade starting from 1 unit up to 10mln with the same features.

I am wondering , what makes Oanda attractive for small traders over other cent brokers? What still Oanda needs to become the ideal environment for small traders?

i trade with oanda because :
1 low spreads.
2 the ability to position size with units.

The low spread could be achieved with many other competitive ECNs and i agree with you that positioning with units is a winner for Oanda.

However, what do you think you still need in Oanda?. Some Oanda traders wish cheaper and more friendly API trading to automate. Others 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 think you hate most in Oanda?

i don't have any complaints about oanda till now. i look for signals on metatrader and place orders on fxtrade because of the units thing. i understand that news spikes are a part of this business. i watch the news calendar and i cancel the stop and tp levels on orders before the news event. after 1 min i retype the sl and tp.
a thing which i hated about oanda were the false signals on fxtrade. i enter trades at the high low of the setup bar h4. now the fxtrade platform showed a clear break of the high but on metatrader was not a break. if you are a breakout trader you can loose money by entering on the break of previsious supp rez because it's obvius that metatrader is right(checked also with thinkorswim). i solved the issue by placing the break out order a little forward than the original break by a distance of the spread

Thank you for sharing. However, price quote is a private propriety of Oanda becuase it is a market maker. Hence, the difference in breakout prices.

I have an empty live account at Oanda and a few demo. And I have used they platforms too: Desktop, Android and iPhone. If you do a trade and you will go to a workplace ( for whatever reason leave your PC ) than you can check what you did in mobile, but the sick product manger whoever it is, doesn't include the functionality to modify your trade in Android, just close the trade!!!

I have used they desktop version, I had 2 trades, as I remember all were Short and in losing I have asked why the hell it shows the %profit positive value. You wont believe: they told me the price has increase with that percent! - but what has that with my trade, what is the "profit" on that?!

I have offered to develop they platform ( I am an old Java developer too), but they refused.

As broker, they are the best MM, but you meet them with all of you side, not just broker, you will need to see those trash reports which they has. ( I do prefer here the Trade explorer, than they report) and I must use they software, but they don't want to make a usable one.

I went to Dukascopy, where first I gave up the sign up process, the second time I took sedative too, but I was luck, because I got a really nice guy at support ( I am extremely satisfied with him). I have patched they desktop platform, but I am not using that one, just mobile.

Right now I am not changing the brokers, I am happy with Oanda's demo account, FF's trade explorer and Ducascopy's live account.

I would suggest like others to be profitable consecutive 3 month, than go with whatever broker you prefer, if you blow up your account for a reason, than go back to demo 3 month and fill up account.

Europeans can have ECN account from 100 base currency at ducascopy EU, fill up with VISA, but carefully, because there are bank fee for fill up + transfer cost to abroad and at witdraw the transfer cost again. It isn't for 100 usd and if your balance goes under 30 base currency than account closed and need to fill up! Also the commission converted to PIP + spread is considerable higher than at Oanda.

Oanda news time: 10 pip spread on EU, 15 pip on GU, a few seconds or a few minutes.

Ducas EU It is good for news trades, for high timeframes trading, and starting from 500$ at least. They has some warranty for money, which doesn't matter for 1-3k accouts.

At Oanda need to fill up at JP Morgan, which had some problems with authority and as I remember it is off-shore.


Conclusion my suggestion it is: under 500$ go eat your nerves with Oanda's software, above leave they and if you are european go with Ducas EU, if not , than idk who is the "best". At 5000$ go with Dukascopy (swiss, not EU).

Thank you for sharing,
My focus on small traders with average 500-1000$ and would like to get the best environment to trade and grew. You bring up the flaw in Oanda software. What else?... My plan focusing on small traders and to build a brokerage to provide the best and proposing win/win situation.

I invite people to share their ideas about this subject " the perfect environment for a cent brokerage" .. What is in your dreams and really would like to find a broker that provide the absolute best qualities of service. What you like most to have if you want to trade small with a broker?

For me a new brokerage has no chance to get my money. It must be on market min 5 years to send to him 1$, but I do prefer +10 years, even if he promise he will pay for me. To many brokers come and go with ppl money.

One strategy it is how Oanda do: let the ppl trade 1 unit, no spikes, almost clear everything, low spread, they will attract beginners and they will lose money, but not instant. Because they had a sense of playing somewhat longer, than limiting to 10,000 minimal units they will refill they account. You can have a satisfied customer ( well, at broker side, not at software ) which will bring his money in system and no need advertisement. I would say this is a win/win case, but in practice they aren't using they software (software quality unacceptable for me), and they support aren't as it should be ( it is acceptable, but not good)

Other isn't a win/win, it needs a lot advertisement to get new ppl: iForex style, it doesn't worth any comment, it isn't a win/win...can't believe they are still up and able to pay those google advertisements...

Other one the Ducascopy EU. Everything cost you money: fill up account, keep trade overnight, commission. Wekend is max 1:30 leverage, but has clear rules and I think: I can trust him. Estonian state gives max 20,000 euro warranty to my money deposited there, so for sure they will not run with my few months savings + they don't need, because they are taking from me enough. Even if 2-3x expensiver than Oanda at none news time, they has notable iOS and desktop software (no Android for live account), support is great ( for me, at least now), if I send a bug they fix it very soon and so on. It should be ECN.

Around 500-1000$ I don't see the big advantage from Oanda to trade the min 1 unit instead of min 10k.

Both of they has the disadvantage as no free web service to query the majors at least.

None of they has an acceptable software for Android system (and there are tablets...)

None of they reports are so usefully as FF's trade explorer.

As you can see, they are coming from financial life and not from software, but they customers will use software to act with they financial services

Thank you for sharing,
I think the thread started to be informative about traders opinion about small-sized trading environment and how to perfect it.

1- I agree with you about the importance of working with secured broker even with very small deposit. I know FX business is full of scams and bonzies. Also , i understand the importance of having in your side the regulators and how much is important to play with regulated brokers with segregated accounts. However, i know some brokerages with good reputation but not regulated. On the other side, i know there are some other brokerage went down miserably and their customers suffers while the broker itself was long established and regulated. I recall now PFG
http://www.dailymail.co.uk/news/arti...ling-100m.html.

But in general, i agree with you on this point.. At least, when things get wrong , traders find some to stand with and regain some or most of their accounts.

2- It was very good point when you put the light on how Oanda uses a nice strategy to down its advertisement costs by using the 1-unit optimal trading environment.

3- Oanda's support, reporting and software .. no doubt all need more work from their side.

I have a commitment that my cent brokerage model is trying to get the best of everything to achieve win/win situation.

What do you think guys if i start this business in New Zealand

Regulations are pretty loose in New Zealand but still, better than those Russia based...