Social trading, Brexit, Turkey, A-book & B-book: Where does the retail trader stand?

FinanceFeeds examines how big data and machine learning can ensure that retail traders can use the most stable and useful strategies at times of volatility due to events that may adversely affect their current strategy that they follow, and how different execution models can be taken into account.

The evolution of social trading from a customer engagement tool into a genuine method of automatically trading the FX markets by applying sophisticated machine learning technology to large databases of information that has been collected over a long period of time has now reached a new level.

When working with clients from across the entire world, modern social trading platforms can now be used to demonstrate two different dynamics, and some of the longest established specialist companies in this particular sector are now able to take the lead in conducting a new means of ensuring that the key factors that face retail traders in times of continually changing markets and brokerage risk management models as well as business strucutres.

Brokerages at the moment have two major concerns. The first is the cost of acquisition of clients, and the second is exposure to clients either zeroing their account or even worse, going past zero (if the broker is an a-book broker) and exposing the broker to negative balances.

During the past few days, for example, the Turkish Lira has been plunging in value and then making slow recoveries although not returning to anywhere near the level at which it has stood quite stably for the last few months, and some firms in London have restricted it to close only, but Turkish firms are allowing traders to carry on, but asking them to make their own precautions.

This highlights a great difference in execution model and risk management policy between retail brokers which essentially offer the same product to customers, albeit on different terms.

On this basis, it is important to take a look at how a good automated system that uses big data and machine learning can not only ensure that brokers maintain their client for longer, but also how a system that moves clients to new strategies doesnt just mean that teh broker saves money with regard to increased lifetime value, but also can mean that traders do not fall foul of extreme volatility due to geopolitical events such as the SNB, Brexit or last week’s attempt at a coup in Turkey as the combination of data plus client preference/skill level which can be matched dynamically to appropriate lead traders.

Additionally, if for example, a trader starts to get nervous or lose money if following a previously good strategy but the strategy has been affected by a sudden geopolitical event, it will increase confidence and mitigate losses by moving the client to a new one.

Today, FinanceFeeds spoke to Leehee Gerti at Tradency, the FinTech company that pioneered the Mirror Trader system 11 years ago in order to examine this matter further. “As a technology provider to brokers for over 10 years, we can say clearly that this kind of complex issues are one of the main hurdles broker have to deal with. Brokers are troubled by sharp market movements as we have seen lately with the SNB and Brexit crisis” said Ms. Gerti.

“Since Tradency’s solutions offer algorithmic trading services, our brokers have a much higher level of control and monitoring which enables then to better predict and prepare for this kind of geopolitics events” – Leehee Gerti, Tradency

“With RoboX for instance there is an inherent currency diversification since the advanced algorithm chooses best performed strategies based on business intelligence analysis and not only market volatility. Tradency also made sure to differentiated itself from social trading platforms” Ms. Gerti explained further.

In conclusion, Ms. Gerti said “Our trading strategies are designed and constructed only by top-notch market professionals and esteemed institutional level hedge funds which deeply understand the market. This concept which we have been promoting since 2005, bears fruit especially in times of major turbulences, we speak to our strategies providers in advance and make sure they are careful and aware. Traders of RoboX and Mirror Trader have glided safely through these kind of events.”

Photograph copyright FinanceFeeds

Read this next

Institutional FX

Marex profit soars 70pct in H1 2022 on commodity boom

London-headquartered commodities broker Marex posted record revenues in the first half of 2022 as strategic investment across its global franchise has positioned the business to outperform in favourable market conditions.

Executive Moves

YourBourse hires 3 executives to transform development procedures

“Valter, Maria, and Sergey bring decades of experience in the FX industry to our company and I’m very excited how they will enable our ambitious growth plans.”

Technology

Baton adds OCC to collateral management network

“For the FCM community, this translates into ensuring money isn’t being left on the table. Our FCM clients are already using the Baton platform to move tens of billions of dollars of collateral every week.”

Retail FX

eToro buys US rival Gatsby to expand zero-fee trading offering

Israeli social trading and multi-asset brokerage company eToro has secured the regulatory nod to acquire no-fee trading app Gatsby as it aims to expand its business in the US.

Executive Moves

Genesis Global snatches CMO Jason Jhonson from metaverse company

The hire of Jhonson follows the announcement that Genesis raised $20 million in fresh funding from US banking giants, Bank of America, BNY Mellon and Citi.

Digital Assets

Celsius subsidiary GK8 integrates with Polygon while looking for new owner

“This integration affords our customers more agility in managing their crypto assets, which is key to creating new revenue streams.”

Digital Assets

BDO Italia audits Tether reserves to release monthly attestation

World’s largest stablecoin issuer, Tether has switched the accounting firm that audits the massive reserves that back its USDT token to BDO Italia, the 5th largest accounting firm in the world.

Retail FX

Libertex bags multi-year sponsorship deal with FC Bayern

Indication Investments Ltd, the operator of FX retail brand Libertex, has secured a lucrative sponsorship deal with German soccer giant FC Bayern.

Institutional FX

PrimeXM reports lower volumes for July as summer lull bites

PrimeXM has reported weaker trading volumes for July 2022, in line with other institutional and retail platforms that saw the activity of their clients dropped compared to a month earlier.

<