Retention automation platform developer Optimove presents an exclusive report on the differences between binary options traders and Forex traders. Forex Magnates spoke with Optimove’s data mining experts at the iFX EXPO International 2014 for a closer look at the analysis that can help brokers better understand the market.
The report was produced based on researching numeric figures from a dozen brokers both in the FX and binary options industries. Headed by Pini Yakuel, Optimove’s CEO and Co-founder, who has over a decade of experience in analytics-driven customer marketing, the company thinks that these insights can help brokers improve their customer retention strategies. The conclusions may also support brokers’ decision on whether or not they should enter any of these markets.
The most interesting conclusion that can be drawn from this research is that while Forex leads are less likely to convert to clients than binary options leads, the ones who do are more likely to remain engaged for a longer period of time. This results in a higher customer lifetime value among Forex traders. On the other hand, binary brokers enjoy a higher initial conversion rate, higher frequency of trades and are less dependent on a small percentage of “VIP traders”, as the company refers to the top 10% of clients in terms of deposits.
Differences in Individual Metrics:
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- Conversion Rate- The conversion rate (from registration to first deposit) of binary option traders is 34% higher than that of Forex traders.
- Second-time Depositors- Forex traders who made a first deposit are 14% more likely to make second deposits (39%) than are binary option traders (34%). This is an important indicator of trader engagement over the short term.
- Trade Frequency- Active binary option traders trade 30% more frequently (once every 3.3 days) than active Forex traders (once every 4.3 days). This is an important indicator of trader behavior and overall engagement.
- Survival Rate- Forex traders are 154% more likely than binary option traders to remain active traders six months after their first deposit. This is an important indicator of trader engagement over the long term.
- Customer LTV- The customer lifetime value (LTV) of Forex traders is 11% higher than that of binary option traders. This is the most telling indicator of the full potential value of each customer.
- Dependence on VIPs- The top 10% of Forex traders (in terms of total deposits) represents a 29% higher share of all deposits (80%) than the top 10% of binary option traders (62%), making binary option brokerages less dependent on a small group of VIP customers.
These results are not surprising with regards to the different characteristics of the two groups. Binary options is a much easier field for beginning traders, so it makes sense that more demo traders end up converting to real-money traders. On the other hand, because traders who get involved in Forex go through a longer and more difficult learning curve, it is reasonable that they will continue trading longer: They have a stronger interest to leverage what they already know and to further improve their trading skills.
Describing the research methodology, Optimove states its data scientists have examined of 18 months of granular customer behavior from a score of online Forex and binary option brokers in order to calculate a set of predefined metrics. They then calculated and compared the averages of each metric for each group (Forex traders and binary option traders). The metrics presented here are all statistically significant (p-value < 0.05); other researched metrics with non-statistically significant differences were omitted from this article.