Trading contracts for difference demands concentration when the market is open and may require serious study outside those hours, but it offers no social interaction - rather, it is isolating. But traders need some interaction with peers. Novice traders need guidance through the complications of the trade, while more experienced traders want to improve results with better understanding and technique.
One answer is Trading Social Network, introduced by CMC Markets in February.
The network - a kind of chat room or blog - is the first attempt by a CFD provider to address the need for mentoring and interaction to suit the computer-literate nature of traders.
Initial uptake was slow. "We noticed both active and non-active CFD traders signed up to the community on launch," says CMC head of web development Stuart Roberts. "But the difference was heavy traders were very active - for instance, updating their blog daily and responding to messages posted on their message board - mainly because they knew what they were talking about and were comfortable discussing it on a public forum.
"The non-active traders signed up and became lurkers, spending a lot of time reading the blogs and message boards, and over time becoming more active within the community and starting to ask questions."
After a few weeks, the network took off and now has about 1550 users.
"The heavy CFD traders who took it up in the first couple of weeks had accounts with us for periods between three months and two years," Roberts says.
"People taking it up later were again of varying experience and activity. We don't see any correlation between sign-ups to the network and trader experience or trade frequency. Now, over half the people who open an account with us subscribe to the network."
The network isn't just fulfilling a need for peer social interaction.
"People looking to make a decision about a new trading strategy post about it to see if other users agree it's not too weird."
It's also providing mentoring and education. "It's like an education program we don't have to run. Traditional mentoring programs are very expensive, but this one runs itself and gets better the more people who join it.
"We noticed quite a few of our VIP corporate desk clients were active users which is a trend we didn't expect. These users are very valuable additions to the community and can add a lot of knowledge and experience."
About 160 users are watched by other traders as they trade, and the most followed trader is likely to have an audience of about 90 watching and learning.
"We sampled 10 users who were traders before the introduction of the social network," Roberts says. "Their activity went up 30 per cent after we introduced the network, while the rest of the client base's trading activity was flat-lining."
To broaden the educational focus, and to meet client demand, CMC "created a widget that allows clients to find people like them".
"For example, if you're having a bad run with BHP [Billiton], you could search for people in the community who were making a profit trading BHP and exchange strategies and ideas."
With the take-up rate varying between 50 and 100 clients a week, and more than 100 requests for new features, CMC is in the process of launching Mark II of the site.
"This will have some interesting new features for lurkers, such as the ability to watch an instrument as well as a person. Instruments like BHP or Rio [Tinto] CFDs will have their own page, so you'll be able to see whether other traders in that instrument are mostly winning or losing, whether they are long or short, and how many people are trading them. And you will also be able to discuss this instrument with other people on the community."
But while the network seems to give good value to the provider - for instance, a mention of a CMC seminar increases enquiries about it - and its clients, it has one drawback for interested non-clients: they can't access it.
CMC is considering ways to let the public slake its curiosity.
"We are looking at options such as opening a separate community for non-clients working off demo trading account data - that is, they could open a no obligation demo account and interface with other CMC demo account holders.
"We're also looking at extracting some of the best blog updates each week for a blog cast, which would allow non-clients to subscribe to see what real clients are discussing."
Fairfax Business Media
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