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Gold-i's Risk Management FAQ's

Gold-i's Risk Management FAQ's

What is risk management, and why is it important?

It is easy to assume that risk management simply involves analysing your clients' trades and deciding who to A-book and who to B-book. However, there is much more analysis that can be done to make your brokerage more profitable. 

For example, have you evaluated the cost of bringing a new client onboard versus retaining an existing client - one who has funds deposited but hasn't been trading for a while? 

What about that client who has switched strategy, done a little homework, or has more success trading DAX than EURUSD? 

This information is not always readily available. Obtaining it can be a lengthy and painstaking process, taking up your team's valuable time. What if you could view all this information, manipulate it and share the results with your colleagues? 

 

What is a risk management visualisation tool?

Information comes to life with graphics, making relevant data easier to analyse. Valuable insights could be lost if the same information is hiding in mind-blurring columns, rows, cells, and text. As it's easier to process data visually, it's a better way to make decisions about the insights they uncover.

Improved data analytics makes for better risk management decision making. However, data visualisations must be accurate and timely, which can be achieved if fed from a single source of connected dynamic data.

 

What is FX risk exposure?

FX risk exposure refers to the risk a broker takes on when they internalise their clients' trades. Over time, a broker can accumulate an ever-increasing position in opposition to their clients'. Therefore, they are exposed to any price movement in the market against that position. All currencies can experience periods of high volatility, which can adversely affect profit margins if suitable strategies are not in place to protect cash flow from sudden currency fluctuations.

 

What is toxic flow?

Toxic flow is the unprofitable orders a brokerage receives and can take many forms. It can be trading on invalid market rates, the inefficiencies of non-sophisticated FX technology or trading in the same direction across multiple trading venues simultaneously. Toxic flow is commonly viewed as unwelcome or predatory, but what may seem toxic to one entity may be welcome to another. However, you will need to be able to identify the toxic flow from the non-toxic flow. 

 

What is the main difference between Visual Edge and Visual Edge Lite?

Visual Edge Lite provides a more limited, non-customisable data set with a sophisticated but simplified display. Being web-based, typically, the software can be set up very quickly because it does not require much client involvement, allowing brokers to get valuable insight sooner.

 

Why is Gold-i Visual Edge unique?

Visual Edge is brilliant as it's an agnostic risk monitoring platform that can be adapted and customised for a customer's individual needs at an affordable price point. From customer feedback, we know that our GUI is above and beyond the competition for its user-friendliness, which is incredibly important when navigating and ensuring that you are making full use of such a complex solution.

 

How will my brokerage benefit from using Visual Edge?

1. A greater understanding of your risk and exposure - When do you need to hedge your risk? You need to make sure that your firm isn't taking on more risk than you intended to – however, without knowing the facts and figures, it is as if you are blindly steering a ship. Visual Edge provides you with accurate, up-to-date information so that you don't put your firm in danger.

2. Ability to optimise profits - Such risk management technology can help you better understand where the profits are coming from and which orders are profitable.

3. A simple way to meet regulatory reporting requirements – Visual Edge is designed for FX brokers to provide back offices with a quick and easy way to access and report required data.

In addition, there's the question of the accuracy of information. Many brokers typically export information from MT4 or MT5 into their spreadsheets for analysis. This is not only laborious but is also open to human error.

 

Learn more about Gold-i's Risk Management Solution, Visual Edge

For a free demonstration or to arrange a trial on any of our award-winning FinTech solutions, please contact sales@gold-i.com 

About the author

Gold-i

Gold-i

Gold-i is a global market leader in trading technology, helping hundreds of multi-asset brokers to transform their trading operations with robust liquidity management solutions, award-winning MetaTrader Plug-ins, business intelligence tools and all with the best support in the industry. Gold-i has won over 20 trade awards in recognition of its innovative products, commercial success and future potential, including a prestigious Queen’s Award for Enterprise 2014. Has been recognised as one of the most influential Fintechs in 2018 and 2019.