Trader Resources Trading Tips

Is social trading all it’s cracked up to be?

social trading

The other day I came across an article at Finance Magnates which encourages brokers to add social trading to their product offering. It offers up ten reasons:

  1. Social trading brings a new age of transparency.
  2. Social trading improves customer relations by creating a more confident trader that is happy trading with your brokerage.
  3. Social trading can be an essential marketing tool that seeks to blast through the acquisition barriers to entry, while at the same time bolstering client retention.
  4. Social trading entices users to convert themselves into traders simply by following and copying already established traders in a broker’s social community.
  5. Social trading helps a broker boost their acquisition and deposits by giving a novice trader who is nervous about losing his money, the notion of being able to copy from already established traders with a proven track record, thus quelling his fear of a first deposit.
  6. Social trading helps brokers lower their attrition rates and in turn boost retention by giving traders an FX community they can feel a part of. Once a trader finds his place in a network and begins following and copying a master, he would prefer to stay with your brokerage and not forfeit what he has already accomplished.
  7. Social trading helps a broker increase their trading activity. When a master trader opens a position in a social trading community, all those traders copying him will open the exact same position at virtually the exact same time.
  8. Social trading networks that are seamlessly integrated into a broker’s trading platform tend to increase the amount of time a trader spends inside the platform, thus increasing trading activity and retention.
  9. Social trading gives traders the ability to trade even when they are asleep. A broker may see his traders being active even during their downtime if they are following a master who may be trading in a different time zone, and is therefore active.
  10. Social trading makes newbie traders more comfortable because the experience is more social and less intimidating.

Obviously, this piece was targeted at the business side of retail forex. Many of the points made relate to gaining and keeping brokerage customers. In fact, at the end of the article the following justification is made:

When implemented correctly, social trading can boost the lifetime of the average trader by 14% or nearly a full month, increase trading activity by more than 50%, increase net deposits by 32% and a broker’s P&L by 40%, thus raising the value of each trader significantly.

I don’t know where those numbers come from as there aren’t any citations included.

I’d actually like to look at things from the trader’s point of view, though. I did a fair amount of work with Currensee, which was the first forex trader social network and one of the early social (copy) trading platforms (they were eventually bought by OANDA, then later shut down). As a result, I got to learn about some of the downsides of social trading. I also recently completed a PhD focusing on trader performance, so I have an idea of the sorts of issues that can arise in this kind of structure.

That’s why I have some problems with #1. Transparency isn’t necessarily all that great. There are signs that sharing one’s trading with others can actually result in worse returns. In fact, at Currensee one of the original Trade Leaders (as they were called) totally blew up once they brought him in to the program. Basically, he couldn’t handle it psychologically. Once they dropped him, though, he went right back to being profitable.

And related to #10, one of the things I heard from the Currensee folks is that traders were messing around with the social trades being done in their accounts. Specifically, they were closing them early, to their detriment.

On top of all this, there is a lot of research into the poor track record of investors moving in and out of mutual funds. This is essentially the same idea as being able to change which traders one accepts social trades from, so that’s another pitfall.

Oh, and as to #9, many traders already have that sort of access. They do so by using Expert Advisers (EAs) and the like to trade automatically.

I’m not saying social trading can’t be beneficial. I’m just saying it needs to be given a lot of thought and consideration.


Trader Resources

Making use of seasonal patterns in forex

As those who have followed my work over the last several years are aware, I have done some research into so-called “seasonal” patterns in the foreign exchange market. This was motivated by observing a tradeable pattern in one of my favorite pairs and using it to make a fair bit of money. Out of curiosity, I did a review of other pairs to see if there were any other patterns worth trading. I really didn’t expect to find anything, so it was quite a surprise when I found them all over the place.

That initial research ended up going into a report I published in 2006 titled Opportunities in Forex Calendar Trading Patterns. Over the years since I have expanded and updated that report a handful of times. Recently, I brought it up to date with data through the end of 2013. If you’re interested, you can get a copy or learn more about it at

I recently had someone ask me why I don’t just trade the information, and presumably horde the knowledge for myself. This is akin to one of the questions myself and others addressed in Trading FAQs. It also assumes there is only one way to trade using this sort of information. That is most definitely not the case!

Seasonal patterns in forex operate in different time frames, just like traders. As a result, there are opportunities to apply the knowledge of such patterns in multiple ways, depending on how you trade the markets.

Trader Resources

Ideas for your 2013 trader reading list

Happy New Year and welcome to 2013. Since I know many of you probably have gift cards for Amazon and the like burning a hole in your pocket, I thought I would help you spend that money by offering a up a few suggested purchases. Here is a list of the books which readers of this blog ordered with greatest regularity in 2012.

Of course my own book [easyazon-link asin=”047179063X”]The Essentials of Trading[/easyazon-link] is of interest to everyone. 🙂

As for other people’s writings, here’s the top 10 purchases by readers.

  1. [easyazon-link asin=”0071614133″]How to Make Money in Stocks[/easyazon-link] by William O’Neil
  2. [easyazon-link asin=”0887306101″]Market Wizards[/easyazon-link] by Jack Schwager
  3. [easyazon-link asin=”1118273044″]Hedge Fund Market Wizards[/easyazon-link] by Jack Schwager (My Review)
  4. [easyazon-link asin=”007147871X”]Trade Your Way to Financial Freedom[/easyazon-link] by Van Tharp
  5. [easyazon-link asin=”1118494563″]Market Sense and Nonsense[/easyazon-link] by Jack Schwager
  6. [easyazon-link asin=”B004RJ8PSE”]Mind Over Markets[/easyazon-link] by James Dalton (My Review)
  7. [easyazon-link asin=”0132825244″]Buy and Hedge[/easyazon-link] by Jay Pestrichelli and Wayne Ferbert (My Review)
  8. [easyazon-link asin=”0470398566″]The Daily Trading Coach[/easyazon-link] by Brett Steenbarger (My Review)
  9. [easyazon-link asin=”0887306675″]The New Market Wizards[/easyazon-link] by Jack Schwager
  10. [easyazon-link asin=”007148664X”]Way of the Turtle[/easyazon-link] by Curtis Faith (My Review)

It is no surprise that My Top 5 Trading Books list is well-represented above.

Of course you can always look to my growing list of Trading Book Reviews for additional ideas. And although it isn’t a print book (yet), my Trading FAQs book is a very good resource for new and developing traders.

Trader Resources

New book out from Market Wizards author Jack Schwager

[easyazon-link asin=”1118494563″][/easyazon-link]Jack Schwager is back on the bookshelves once again. Only a few months after the release of his latest Wizards book, [easyazon-link asin=”1118273044″]Hedge Fund Market Wizards[/easyazon-link], which came out in May, he now has [easyazon-link asin=”1118494563″]Market Sense and Nonsense: How the Markets Really Work (and How They Don’t)[/easyazon-link]. I had a note from Jack describing the new book in this way:

Market Sense and Nonsense is my personal compendium of the widely held investment misconceptions I have observed in the course of my career. The book has its origins in the various investment fallacy talks I gave at industry conferences in the mid-to-late 2000s, I always envisioned a book around this theme, but the idea had to percolate for many years before I could figure out how to write a book that was both pertinent to industry professionals and accessible to lay investors.

Although the publication of Market Sense and Nonsense comes only six months after the publication of Hedge Fund Market Wizards, it has been in the works for several years. I set aside a draft of Market Sense and Nonsense to write Hedge Fund Market Wizards, and I returned to complete the project after that book was finished (which explains the short time gap between the two books).

The basic theme of Market Sense and Nonsense is that many widely held investment assumptions are quite simply wrong—that is, if we insist they apply in the real world. I hope that Market Sense and Nonsense prompts readers to question some of their previously unquestioned investment assumptions and to change some long-held beliefs.

I anticipate giving [easyazon-link asin=”1118494563″]Market Sense and Nonsense[/easyazon-link] a read myself before too long, and will post a review once I have done so. In the meantime, if you have thoughts on this or any of Jack’s earlier books, definitely feel free to share them.

The Basics Trader Resources Trading Tips

More than just basic free trading advice

In the process of preparing for the review of Hedge Fund Market Wizards I posted yesterday I went back and read some of the reviews of prior Market Wizards books. I have long been an advocate of the series, and remain so with the addition of the new book, it’s worth seeing what those who don’t agree have to say. Their arguments against one or more of the books help me produce a better review.

Now folks are going to have their own opinions. I’ve got no problem when people disagree with me. I did, however, see a couple of repeated version of the following comment that I have a problem with:

I dont understand what really gets those books so many positive reviews. Seems people dont surf internet to get some basic free trading rules like “Let your winners run”, “Cut your losers”, “Dont add to losing positions” etc etc.

Its all virtually the same FREE information spoken by different people!

That one came from a 2010 review of [easyazon-link asin=”1592803377″]The New Market Wizards[/easyazon-link]. I saw similar comments from other reviewers of the different books, so it’s not just one person’s view.

Has it never occurred to these folks that the Market Wizards books are a major (perhaps the major) source for those rules? Obviously not.

Yes, there is a great deal in these books which can be called common knowledge at this point. It wasn’t so common back when the books first started coming out. Believe me. I was a new developing trader in those days. This was eye-opening stuff.

It’s a question of context, though. Reading that you should cut your losses on some website, in a forum, on in a book about trading is one thing. Getting the same advice from someone who can tell you why and provide you with vivid examples of what happens when you don’t from their own experiences is a whole different thing.

But the Wizards books are about more than learning rules. They can also be a great way for someone trying to find their niche in the markets to get a broad survey of different ways successful traders approach and think about the markets, potentially giving the reader something they can latch on to for their own trading.

Trader Resources

Top Trading Reads from 2011

In case you have an Amazon or Barnes & Noble gift card burning a hole in your pocket, here’s a list of potential purchases. These are the books readers of this blog bought most frequently in the last year.

  • [easyazon-link asin=”0137085508″]Investing with Volume Analysis: Identify, Follow, and Profit from Trends[/easyazon-link] (my review)
  • [easyazon-link asin=”0071614133″]How to Make Money in Stocks: A Winning System in Good Times and Bad[/easyazon-link] (on my Top 5 list)
  • [easyazon-link asin=”047179063X”]The Essentials of Trading: From the Basics to Building a Winning Strategy[/easyazon-link]
  • [easyazon-link asin=”0137085516″]Profiting with Iron Condor Options: Strategies from the Frontline for Trading in Up or Down Markets[/easyazon-link] (my review)
  • [easyazon-link asin=”0071440992″]The Handbook of Fixed Income Securities[/easyazon-link]
  • [easyazon-link asin=”0750660783″]Bond and Money Markets: Strategy, Trading, Analysis[/easyazon-link]
  • [easyazon-link asin=”0470932201″]Interest Rate Markets: A Practical Approach to Fixed Income[/easyazon-link]
  • [easyazon-link asin=”0470521457″]Diary of a Professional Commodity Trader: Lessons from 21 Weeks of Real Trading[/easyazon-link]
  • [easyazon-link asin=”1592802974″]Market Wizards: Interviews with Top Traders[/easyazon-link] (on my Top 5 list)
  • [easyazon-link asin=”0137079303″]Mastering Market Timing: Using the Works of L.M. Lowry and R.D. Wyckoff to Identify Key Market Turning Points[/easyazon-link] (my review)
  • [easyazon-link asin=”0470594594″]The Trading Course: Technical Analysis, High-Probability Set Ups, and Execution Tactics[/easyazon-link] (my review)
  • [easyazon-link asin=”007147871X”]Trade Your Way to Financial Freedom[/easyazon-link] (on my Top 5 list)

Make sure to check out all my trading book reviews.

Trader Resources

Where can I find a mentor?

I came across this post on one of the trading forums I frequent and thought it would be well worth sharing here because I talks about something I would like to address.

Hello all,

I’ve been training myself for the past few months on forex and stock trading, so far so good (especially for self taught). I’m well on my way and able to see the bigger picture, but my fine tuning needs some work. I’m beginning to get frustrated and down at this point as I have really high hopes for this (not unrealistic, just high) and am hoping to make a career out of trading.

I do not personally know anybody else who trades and therefore am on my own. The part about trading that I appreciate the most is that we work for ourselves and that our own hard work determines our success. Having said that, about 4-5 months ago, I was part of a mass “down sizing” where I worked. I’ve always wanted to work for myself and saw this lay off as a sign. I quickly took action, having spent countless number of hours daily training myself, staying up all night at times if I had to, stopped going out just to give myself more time learning. I know I’m close to getting my system down, but something is still a little off and my entries/exits arent quite right yet.

As I’m doing this alone, I cannot always see my own errors, only a 2nd pair of eyes can point out what I’m doing wrong.

I am in the Dallas / Fort Worth area and very optimistically searching for a mentor or anybody that can give me guidance. If you are willing to help, or know anybody who would, please PM me, I am available anytime of the day, night, weekends, ANYTIME, this is priority #1 in my life.

I thank you for having taken the time to read my post and thank you for any help you may be able to offer.

Happy trading to all!

Obviously, this poster is very eager to learn and develop as a trader. The fact that he’s looking to identify where he’s having problems is a very good sign. Finding a mentor for 1-on-1 work as an individual traders can be very hard, however, as I’ve written on this blog and in magazine and book articles previously.

But here’s a question.

How valuable, given your own situation, would you find a sort of group coaching session?

I’m thinking in terms of something like a weekly meeting of traders – either in person, via phone, or online – where a group could get together to talk about their trading, share their ups and downs, get help improving their performance, and maybe even collaborate on strategy. Do you think that sort of social/educational interaction would have a big impact on your trading experience?

Leave a comment below and let me know what you think – and where you’re currently at with your trading.