The lessons learned from operating a Forex Trading Game.
People may not know that Freevestor operated a Forex Trading Game from September 2013 through April 2014. Freevestor was even a Forex Brokerage for 28 glorious hours, which is an interesting story on its own. The Freevestor Trading Game was spawned by a desire to create better traders, build trust and nurture leads who would eventually deposit funds. It was initially conceived for stock trading, but the 24/5 nature of the Forex Market meant that there were more opportunities to trade and more markets to attract.
Freevestor offered a challenge and a carrot to motivate demo traders. Traders received $500 in their demo accounts and they would trade with it, if they reached $25,000 in their accounts they would receive a $500 live account on the house. From a retention standpoint, it worked. However, the difficulties faced with the Forex Brokerage were an existential crisis that put promotional efforts on the backburner as there would be no point to having the Trading Game if the brokerage would not be revived. The brokerage could not be resurrected despite exhausting all remedies and the currency, commodity and CFD trading game ended as well.
What does this have to do with you?
Here are 8 observations about novice traders from operating a Forex Trading Game.
1. Novices have NO IDEA what they’re doing.
Generally speaking, the trades entered made absolutely no sense and had little rhyme or reason. The trades were placed out of boredom or the expectation that there would be more action than there would.
Merely entering a trade seemed to be a challenge even with multilingual instructions. This resulted in participants placing trades that were duplicative 15 minutes from one another.
It is no wonder that B-Books eat these retail Forex traders alive.
2. There were good traders who just couldn’t help themselves.
It was painful to watch a few traders actually come close to reaching the $500 live account prize and blowout their account because they wanted to see profits run at unlimited cost.
E-mailing these traders and asking why they did not put a stop loss or take profit on their trades when they were doing this previously resulted in responses of “I forgot” and “I got carried away”.
It was simply amazing to watch traders build up the account and absolutely tank because of what would seem to be the smallest things.
3. Repeating the same mistakes even when coached NOT to make them
Coaching prospective manual traders was a chore and analyzing the trades revealed the most fundamental of flaws. Of course, the biggest mistakes were related to when the trades were placed and the trading parameters (Stop Losses and Take Profits).
Reminders and breakdowns of traders’ activities sometimes went ignored, but other times were acknowledged. However, they would just make the same mistakes again regardless of response.
4. People want something for nothing and putting in a little extra effort is sometimes too much.
Putting in the bare minimum into the trading experience was common. The trading game participants literally placed a trade like they would push a button at a slot machine. No examination nor rationale given and certainly no concern to risk management.
5. Undercapitalized traders are easy to attract, but have poor attention spans
B-Book Brokers that offer wild amounts of leverage and excel at pressure sales are literally taking these novices’ money with ease, but the cost of acquisition is only worth it if these traders do a terrible job at trading. The good news for the B-Book Brokers is that 75% are as bad as advertised.
Undercapitalized and demo traders forget that they have accounts and need constant communications. It is why demo traders get tons of e-mails and even sometimes phone calls, it is part of the sales funnel and they want to keep you engaged with their products and services.
6. The Scalper who did not realize how good he was at scalping
Many novices overtrade and place too many trades or look to compound their scalps. There was one guy who quintupled his account in 36 hours by scalping. He placed 96 trades in 36 hours, he was the dream client as he was not only profitable, but he placed such a large volume of trades.
Was it a lucky streak or was it just plain skill? It is so hard to say given the scalping method that he had.
7. Interacting with wonderful people from all around the world
Interacting with people from all continents with the exception of Antarctica was rather special. Bringing them together with a trading game, helping them improve and actually seeing their improvement was rather uplifting in a small way.
These prospective brokerage clients were not all looking to strike it big on one trade, they wanted to reach the goal because if they could do it once then they could certainly do it again. They learned from mistakes and sometimes repeated mistakes because they could not help themselves.
There was an appreciation for the process, dedication and effort that was evident.
8. In hindsight, the Forex Trading Game concept may not have been helpful
Despite the hand-holding, coaching and motivational carrot offered, there were flaws:
- Encouraging small depositors is not a good idea.
- The goal of reaching $25,000 was unrealistic and did not foster a healthy attitude.
- Not encouraging automation back in 2013 and 2014 was a mistake.
- No portfolio management encouraged.
While the coaching and better habits were taught, it was still unfortunately a feeder pool of prospective traders to be eaten alive. It was made with the best of intentions.
Brokers, Introducing Brokers, Signal Operators and Investors need to be on the same page as far as expectations. From processes and operations to results and benchmarks, greater transparency is necessary.