Social Networking is suddenly making its presence felt within the retail FX trading community because of a basic human instinct to create groups and tribes, notes Kellie Durazo, principal, professional trader and lead instructor at FX V-room. She comments: “I think there’s always been a desire within forex trading for a community, for a place where you can learn trading techniques, share information with fellow traders and learn about what’s happening in the industry.
“With social networking growing on a global scale, and with Facebook having more than 300 million users worldwide, we are also no longer handicapped by our location,” she continues. “Additionally, I think you’ll see it grow even further with live group trading, webinars conducted not only by experts like ourselves, but peer to peer and especially ongoing education. But just like a classroom, users will be able to discuss amongst themselves the overall experience. I think as technology gets more advanced and bandwidth gets faster, you’ll start seeing more and more social networking through video too.”
Currensee CEO, Dave Lemont, agrees that the main reason for the rise for the retail FX network is that the life of a forex trader can get fairly lonely and isolated. Traders need a support system of other traders but don’t know where to find them, Lemont notes.
The role of networking sites for retail FX traders is in providing them with somewhere to learn about different trading techniques, agrees Kyle Cottrell, managing director at MoneyTec, an informal, interactive networking environment where members can exchange information and resources separately or as a professional group, and debate and discuss related experiences to enhance the quality of their knowledge and services. He adds that this is so they can find the best method for them, so they can adjust to market changes rapidly, and find new strategies when former trading techniques fail to be as effective.
Cottrell says: “Social networking is the way to go, and we’re adding more social networking features to our site as we move along. For FX retail traders, they can learn more from the social networking format, from other people’s mistakes, successes and different trading styles; this is opening doors and planting seeds in people’s minds, and allowing new ideas to get into their heads and grow.”
Some FX retail networking sites are independent, supervised by voluntary moderators and sponsored by various big names in FX, while others are run by brokers and lead members towards a specific way of trading. MoneyTec and FX V-room are both independently run FX networking websites.
However, sponsored communities in FX are beginning to appear, which are taking the lead from futures and equities-based sites like Motley Fool, states Hayel Abu-Hamdan, head of business development at MIG BANK. “Engaging in a community is a dialogue, where much of the content is not actually created by the community sponsor. The traditional banking model struggles with the ceding of control that successful communities demand.
“However there is no denying the growing popularity of communities like Facebook, LinkedIn and eBay, and to stay out of communities is arguably a riskier option than engaging with them,” continues Abu-Hamdan, who adds that a branded community may be the way to go for many looking at the value of a retail FX networking site, rather than an independently-run system.
“Any branded community will need to be overseen by a company man, and their role will be to stimulate debate and monitor for negative sentiment and engage to resolve such sentiment. The value to the company of a successful community is the customer lock in that this creates because once a customer has created a network in LinkedIn, it becomes hard for them to move to Plaxo,” he concludes.
Currensee’s Lemont notes: “The forums, such as Forex Factory and FX Street, provide information and education, but it’s difficult for a trader to know who to trust. Currensee provides transparency; traders can see the real trades, performance and strategies of other traders, connect with traders with similar trade strategies and learn new ideas through collaboration. Traders want to understand what makes one trader more successful than another. This learning can only be discovered through collaboration via real trades and performance data,” says Lemont.
Lemont says in order to join Currensee, members create an account that links directly to their brokerage account. Currensee creates a secure connection to the broker, so that trades are recorded as they happen and are shared with the member’s trading friends in real time. Members can also elect to share their performance creating reliable transparency in the community.
Most financial social networks that exist today are in the forum or discussion board space, or outside of the forex asset class. Lemont comments: “We see ourselves very differently from the forums and discussion boards because of the transparency and the real time nature of our trade information. Currensee traders come together to share real trade information with each other. It might be to share trade strategies, particular trading ideas and to ask technical questions.
“We’ve found that a forex social network acts very differently when the members are talking about real trades. Our vision is to build a platform that is driven by authenticity and transparency, which means real traders collaborating on real trades in real time. You can almost think of it as Facebook meets TripAdvisor for Forex traders,” he states.
Currensee’s goal is to support as many brokers as possible to give traders the option of joining their broker of choice. Today, it supports close to 100 different forex brokers, including all MetaTrader4 brokers, and have partnerships with many of them. Some of the brokers it supports include FXCM, Gain Capital, MBT Trading, FX Solutions, Forex.com, Alpari, FXDD, IBFX, and CMS.
Its research, platform and educational partners include The Hansen Group, FX Tech Strategies, Ninja Trader, Candlecharts, NetPicks, Tradesight, Traders Laboratory, Forex Briefings, FX Instructor, Informed Trades and many more. It also has a relationship with Thomson Reuters IFR Markets, where Currensee’s traders can purchase exclusive widgets featuring their trade and market data.
Abu-Hamdan comments on how a branded community can work well: “In the FX context, education satisfies the novice broker's immediate need to learn how to get trading, so it sells itself. More subtly it places the education provider in a position of expertise which is a different relationship to the customer-salesman relationship. Most people question the motivation of a salesman but are willing to accept information from someone we see as an expert.
“The trick is to tie the prospect in while they are happily learning to trade,” continues Abu-Hamdan. “For instance, engaging them in a community, or grabbing their email address so that you can engage them on a personal level. This interaction should be considered in the context of the long term relationship. If done well it will create strong relationships which can withstand the odd negative experience and ideally will lead to the client disseminating viral marketing materials,” states Abu-Hamdan.
On education, MoneyTec would like big brand names to openly discuss issues and subjects with its site visitors, as long as they add useful content and do not blatantly spam the community, yet most have not learned the proper way to harness the community assets to their benefit. Cottrell explains: “I’d like our site sponsors to come into the site, be transparent about who they are and even dedicate a team to talking to people on the site, educating and helping them. But they don’t see it that way and would rather just put up banners than have a dialogue with our members.”
Some retail FX networking sites are owned by brokers, while the likes of MoneyTec and FX V-room are independent. Cottrell notes: “We have had several offers from brokers to buy us out, but it’s not the way we want to go.”
On how social networks for retail FX traders have differing value propositions, Durazo comments: “You have social networking forums created by brokerages and although you have a lot of people on them, the end goal for all these communities is for you to open up an account with the controlling brokers. FXCM with its DailyFX, and Cureensee.com, are mostly about guiding users back to a broker.
“The main point of difference about FX V-room is its all about the user. We are a neutral party that does not manipulate the user in anyway. We offer a platform for peer to peer sharing and connecting. We also offer a great deal of educations and tools for our community members who are seeking help in their trading. This is the biggest difference with us versus and Facebook or Linkedin,” explains Durazo.
She continues: “Some of the main forex tools and features these networks provide are for a worldwide community of FX trader's from all backgrounds and all walks of life trading this industry. FX trading is decentralised and can be done from just about anywhere these days, so in order for traders to be able to communicate with each other and exchange ideas, analysis, and tips, these communities function to facilitate this. Of course, a well rounded, exceptional network is going to provide much more than this, including education, analysis by teams of FX experts, and a way to specifically connect with other trader's who trade similar to their own style of trading.”
As well as retail traders, MoneyTec has a good number of institutional traders on board. Cottrell says that while there is a lot less of them than the armies of retail traders out there, they are getting just as much out of the networking site as the retail fraternity, making their own groups and also mixing in with the retail traders.
“I believe networking is a very useful tool for any kind of trader,” Cottrell states. “Yet as forex evolves, the rest of the world is really seeing retail traders falling out of the woodwork, particularly in Asia and India right now. At the end of the day, you can put as much software on your site as you want, but it’s the community that will make it evolve.”
While Durazo comments: “Whether you are that individual trader who trades from their home computer, or the institutional trader, trading as a group, everyone should consider joining a network. The more trading ideas and analysis shared, the better everyone's trading will be.”
On how social networking is likely to evolve, Durazo says she believes investment opportunities will begin to open up worldwide. “There has also been a great deal of talk about a global currency,” she adds. “I think social networking is beginning to close the global gap, and with new amazing translation tools, we’re beginning to see that language is no longer a barrier. My belief is that video will begin to have a stronger presence in social networking sites.”
Lemont adds: “Forex trading is a global industry and we have traders from all corners of the world and almost every country in the world. We see this trend continuing. Social networking is evolving into social trading. The internet and Web 2.0 technology provide a platform for people to share their experiences and their real trades from anywhere in the world.”