Social trading applications have become almost ubiquitous over recent times, especially among FX firms aiming their service at the increasingly competitive retail market.
Yesterday, social trading application provider TopTradr announced the launch of an FX trading competition which will be hosted via the firm’s companion application which is powered by FXCM’s API.
Examination of Trading Patterns
TopTradr was designed to set in place a form of social network made up of profitable traders, and each trader gains a TopTradr (TT) score which is calculated using a proprietary algorithm designed to factor in risk and reward, and consistency and profitability of traders.
Although some preliminary monthly contests began in June, no actual awards have yet been issued, the first prize payout set to take place this Friday, July 19, and will be in the form of a payout to the winning trader.
The inaugural contests were held on a monthly basis, but the actual six-month main prize competition will begin once 5,000 users are registered for the contest. The winner of the competition will be awarded with the opportunity to manage the equivalent of a $1 million hedge fund.
Luck vs Skill
According to TopTradr, the algorithm also works out the difference between a trader who is able to navigate the market correctly and develop skills, and a trader who gains as a result of luck. The long-term performance of the traders is monitored, and the skilled ones awarded accordingly.
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By doing this, each has a chance to win prizes on a weekly basis, regardless of the trade size, instrument or volume.
The TopTradr application, which is compatible with desktop, and iPhone and Android devices is downloadable for free and according to James Olden, the firm’s CMO ““the app’s ranking system is based on criteria that professional hedge funds use to evaluate performance.”
Lifetime Value Of Importance
Nowadays, with such an evolved retail FX industry, a matter which is important for FX firms is ensuring that traders stay with them long term, and trade enough volume to make it a viable business. This year, whilst volumes have increased dramatically over the dismal environment of last year, spreads are low and with the onset of more and more demand for STP non-dealing-desk business models, these factors add to the requirement for firms to encourage long term trading.
Whilst social trading and copy trading has become so commonplace, with four trading signal providers having recently been shown a red card by MetaQuotes amid allegations that they hacked the firm’s MT4 protocol, new educational ideas and social trading innovations are always on the agenda for all such firms in order to continue what has proved a solid method of attracting and retaining clients.
By partnering with FXCM, TopTradr will no doubt aim to provide the firm with longer term retail traders by way of the trading competition, bearing in mind its six-month observational period as well as its weekly smaller payouts.
Mr. Olden concluded: “TopTradr is an educational tool and companion app built to help people understand risk and trade responsibly. We partnered with FXCM as it is committed to properly educating its users to understand the safe way to trade, rather than high-risk trades that may be subject to larger losses. FXCM believes in the model to the point that it is willing to back the best traders with its own capital.”