There are many participants in the financial world. These include liquidity supplying brokers who also provide price quotes. Brokers possess platforms where online trading is possible. Binomo platform is one of such platforms. And finally we have traders. We can distinguish between institutions and individuals among them. Either way, they can sign in with the broker directly or they can be introduced by the Introducing Brokers. And this is exactly what this article will cover. I will present the IBs world to you.
Introducing Brokers’ presentation
In order to attract new traders many brokers are running advertising campaigns. The main focus points include the scope of popularity of their platform has and the geographical regions covered by their services. Such marketing campaigns are not that easy to conduct because people are afraid of scammer. There are, in fact, plenty of fraudulent platforms and you should be very careful when choosing one. Trading platforms are very popular nowadays and so the crooks try to take part in the game.
And now there are Introducing Brokers. Their role is to recommend certain brokers to the traders. This works like affiliate marketing. The IBs reach out to the traders and describe what makes this particular broker a reliable one. When a trader decided to open a trading account on the broker’s platform, the IB will receive a commission from such a transaction. In such a scheme all three parties benefit.
I will show you how does it work on the example from the real estate world. The owner hires a real estate broker. The latter has a few people working for him. Their role is to look for individuals or agencies that would like to buy the real estate we are talking about. When the transaction is finalized, the owner will pay a commission to the real estate broker. The broker will share it with the person who introduced the client. At the end of the day, everyone receives something.
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The IB’s types
In both, real estate and trading businesses, you will come across two kinds of people.
In the first group there will be persons who are not really interested in the trading world. What they are good at is marketing. They developed the necessary skills to persuade you this is just the platform you need. They may even not know how the platform is working. They only know that people often turn to trading platforms in the hope of fast earnings. And they use this knowledge. They offer derivatives trading because derivatives are quite easy to understand. Sometimes, they may even promise to deliver free trading signals as soon as you sign the contract with the broker they are working with.
The IBs from the second group know what trading is. They are often traders themselves willing to share their experience and knowledge. They refer new traders to the brokers they truly trust. And they are ready to guide you through the trading journey even after you have opened the account. They do understand that the money from the referrals will continuously flood when the clients will be satisfied with their service.
A few commission schemes for the IBs
There are a few different possibilities in the ways the Introducing Brokers get their commissions. They depend on the particular platform, but generally, we can distinguish 4 schemes.
- A commission that is paid once only when a new trader comes to the broker and opens an account on their platform.
- A recurring commission that is paid on the basis of the total trading volume that the referred traders have made.
- A commission that is paid from the losing transactions the referred traders made. There is admittedly no evidence of such practices.
- A commission that is a bonus for many new traders referred or the big volume the new traders have traded.
The diversity of the commissions paid to the IBs allows them to make quite good money. But another effect of such a variety is that the IBs want to provide a valuable service to the referred traders. The more traders gain, the more transactions they make. Also, if traders are making money they will stay with the broker. The bigger volume, the higher commission for the IBs.
Nevertheless, some part of the IBs will not be interested in relieving quality information. They do not know the trading world well and they think only about their own business. They often advise trading short-lasting derivatives, between 30 and 60 seconds. They will make money regardless of your results.
Choosing the right IB
You may be a little worried now about choosing the right IB. But here is some good news. The simplest way to differentiate between good IBs and the bad ones is to study their websites and to check the content. You are looking for quantity and quality. Good IBs share a lot of knowledge. Their websites are full of information about the platform itself and how to reach for help as well as the descriptions of different markets, different assets and strategies. Moreover, all the information is available without extra payment.
Often, the IBs with not so honest intentions do not provide a lot of information for free. They are giving a lot of promises instead. You will get access to the newest tools and trading signals after registering on the broker’s platform.
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IBs’ acquisition strategies
The main role of IBs is to bring new clients to a particular derivatives broker. No matter is it a good or a bad IB, the methods they are using are similar. There are a few steps the IBs are following.
- A pleasant and friendly attitude.
- Identifying himself as a successful professional trader.
- Acting as the most valuable instructor who can teach how to earn money.
- Referring to the special broker.
These steps are common to both, good and bad IBs. You will find such information on their websites. And now the question is how to recognize who is who.
The IBs who are interested only in their own money and not in helping you will promise a lot. You may be not that much into trading and just send them an email out of curiosity and they will try all the possible tricks to persuade you to register an account with a special broker. They promise educational materials, trading signals, everyday consultations and so on. But as soon as you open an account with a broker, they cease to send any information to you. They go on to the next client that can bring them money.
Obviously, you do not want to be one of those clients. So what else can you do to recognze a trustworthy IB?
The methods of identifying good IBs
Recommended markets
Generally, IBs suggest the online derivatives trading market. Nowadays, derivatives trading has become very popular, so this will be also on their main list.
If the IB advises trading derivatives, your next step should be checking what time frames they promote. Your suspicions can start to arise when the IB insists the short-lasting derivatives are the best.
The thing with short-lasting derivatives such as 30 or 60 seconds is that they are quite risky. The market changes rapidly and it requires some experience to be able to read the chart and act fast. This is true that 30 and 60 seconds trades can earn you profit faster than 5-minute derivatives. They can, however, take you down much faster as well.
Capital management tactics
You should develop a money management strategy. In fact, this is one of the basics you should not start trading without. And there is plenty to choose from. Some are riskier than the others, though. A good capital management tactic will protect your money first and focus on making profits in the second place.
If the IB suggests using solely high-risk money management strategy, you should take a closer look at him. It is not that those strategies are wrong. They can work, of course. But they should be used with caution and be recommended to professionals, not the beginners.
An example of such high-risk capital management strategy is the Martingale system. Its main rule is that you increase the investment amount each time your transaction fails.
The number of trades in one trading session
In the beginning, you should act very thoughtfully. Limit the number of markets, strategies and positions. Focus on one asset and get to know it well. Choose one trading strategy and adjust it to your needs. Do not open more transactions than 10 in one trading session. Moreover, do not open more than 1 transaction at the same time.
Do not trust the IB who promotes opening simultaneously many positions many times in one session regardless of the trader’s experience. This is a hint that he wants to gain a higher commission and not patiently help you become a successful trader.
Their own way to success
This is a very common tactic for the IBs to boast about their own successful trading. You may even find the snapshots of the sums of money in their accounts. They do this to show you it is possible. That you can also make huge money trading.
The question is, how did they make it? And this is a piece of information you should look for. If you cannot find it on the website, do not hesitate to ask the IB about his methods. Good IBs are willing to share the strategies that worked out well for them. Their mission is to help people get the best out of trading.
Bad IBs do not provide trading guides and do not share the strategies they used along the way.
Famous students
This is quite normal to be proud of your students. The IBs often declare they have educated many successful traders and many of them have become millionaires. Then, they would hide behind legal ties which do not allow them to reveal the millionaires’ names. Sometimes, they would encourage you to sign in this particular platform to become a member of a special “millionaires group”. Trust only information that is possible to verify.
Conclusion
This article’s purpose was to present the IBs world to you. I believe your knowledge about it has expanded after reading it.
The IBs role is important as they know the platforms well and can introduce you into the trading business. But as I mentioned many times in this report, dishonest IBs also exist. You should, therefore, take your time to make a decision with whom you want to stick around. Follow the hints I gave you in the article and you will have great chances to end up with the good one.
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Do you have any experience with the IBs? Did you sign in because of the IB’s recommendations? I would love to hear from you. Tell us your story in the comments section which you will find down below the site.
Wish you success!