Interested in knowing about other exciting opportunities in forex aside from trading? This article will cover four other prosperous careers related to this niche.
To ease the pressures from direct forex trading, many traders have broadened their horizons by taking advantage of industry-related opportunities. From starting a brokerage for a fraction of the cost through a white label to trading tens of thousands for a prop firm, several different ventures exist.
One of the advantages is most of these careers have a low barrier to entry. However, a substantial amount of knowledge and experience is the common thread amongst them determining the likelihood of success. Let’s look at four of these careers.
1. Introducing brokers/affiliates
Introducing brokers and affiliates are avenues offered by nearly all forex brokers. It is no surprise why many sole traders and rebate providers have gotten involved in these partnerships.
Both endeavors fall in the realm of affiliate marketing. Some may be confused over the difference between an introducing broker (IB) and an affiliate. By definition, an IB is an individual or organization introducing a broker to clients and maintains a direct relationship with them by offering additional services such as support, training, contact, etc.
For their efforts, the broker compensates the IB through the executed trading volume of their clients. Meanwhile, an affiliate only recommends a broker to someone but is also paid similarly.
An IB was a more formal and professional role than an affiliate over the past decade. Nowadays, both functions are more or less the same since they can exist as one-person operations.
They each involve a process of introducing or recommending a broker to a client or clients and receiving a small cut from every position they take or a set one-time commission. More specifically, the commission structure for IBs or affiliates commonly nowadays is either:
- A set rebate for every position made by their referred traders
- The CPA or Cost Per Action model, which involves a one-time compensation provided clients meet a particular number of lots over a certain period
2. Account managing
Two of the most well-known managed accounts in forex are PAMM and copy trading.
- PAMM (Percentage Allocation Management Module) is a popular managed account. It involves a selected expert trader whose positions are automatically copied onto investors’ accounts within a pool.
Those invested will be allocated a portion of the total fund profits after a specific period. As an account manager, one would apply a commission from these gains and sometimes state a minimum investment.
A broker will handle all the setting up of the PAMM account for both parties with consistent trading conditions. Of course, the monetary success of a PAMM account manager depends primarily on their strategy, the size of the pool, and the number of investors in it.
However, the process of being selected is complex as the experienced trader needs to provide a reasonably lengthy profit track record and maintain their performance in a very risk-conscious manner according to defined metrics.
- Another subset of managed accounts is copy trading. It shares many similarities with PAMM in that it also involves the replication of an expert trader’s positions onto the accounts of mostly less experienced investors.
The only slight difference is that copy trading offers more flexibility for the investor as the commitment isn’t as fixed, allowing them to move and switch between managers without any penalty.
3. Prop trading
Proprietary trading, or prop trading, refers to an investor trading a large fund for a private financial institution. This concept has existed for decades and technically still is present in a formal capacity.
In the latter scenario, firms like commercial and investment banks employ a trader typically with a degree qualification in mathematics, economics, or finance to trade for them, along with other duties.
Fortunately, several private prop firms exist not requiring any of these credentials. The experience compared to traditional prop trading is only similar since many institutions work on commissions rather than monthly salaries.
Regardless, the key advantage is traders have access to substantially larger funds than what they could begin with ordinarily. Here, they can prove their skills for the opportunity of earning sizable income because of the higher starting capital.
In most cases, the trader needs to commit a one-time fee for this privilege and go through some evaluation process by meeting specific key performance indicators. If they are successful in passing this stage, on average, they can access accounts starting from $5000 to $200 000, and sometimes higher.
Examples of the most reputable and established prop firms in forex currently include The 5ers, FTMO, Maverick Trading, and AxiSelect.
4. White label brokerages
This opportunity does have a much higher barrier to entry compared to the others. Nonetheless, it could be something an aspiring and ambitious brokerage owner could consider, as the costs of setting up and running a broker are considerably less than starting from scratch.
A white label refers to leveraging the resources of another broker, though marketing them as if they were your own. Numerous popular brokers are white labels, even when the average person cannot tell they are using another firm’s systems.
One of the main advantages is the exorbitant costs of starting a broker from scratch are significantly reduced with a white label. Within a few months or less, one can have a running broker with all the necessary services.
The white label provider handles and provides all the critical operations such as regulation, software licensing, back-office support, branding, marketing, etc., all for a one-time set-up fee, ranging from $10 000.
Moreover, the white label owner must also pay monthly fees ranging from $3000 to the white label provider for maintaining everything.
While active trading is a challenging endeavor itself, the careers above are also quite demanding, requiring time, dedication, and some financial resources. Regardless, they can be brilliant avenues for diversifying income streams.
For instance, countless private traders are also affiliates, trade for prop firms, or aspire to own their brokerage someday. A financial market like forex is diverse and offers several ventures for building wealth and self-actualization.