Interesting study about trading and social network

The Dedicated and the Dabblers: How Social Interaction Propagates Active Investing

Our analysis of a new dataset on the activities of retail foreign exchange traders who are participants in a social network supports our hypothesis that social interactions promote the growth of active investment strategies. We apply a population evolution model in which strategies are transmitted through communications between investors and their adoption is motivated by the promise of high returns. The model predicts that the average individual employs increasingly active strategies so long as the propensity to reveal one’s strategies is increasing in realized returns, receivers of communication increase their trading intensity in response to hearing of higher returns, and the volatility of returns for those who are characterized as being active traders are greater than those for whom are not. We confirm the predictions of the model by documenting two novel empirical findings: on average, individual investors are more likely to initiate communications with other investors the greater their returns and they increase their trading intensity upon hearing of good returns.

While in most standard theory the flow of information within networks leads to better performance among market participants, we find that communications between investors may reinforce and even promote reckless trading behavior. This is largely driven by bias found among traders in which they develop forecasts of future returns that are merely extrapolations of the recent performance of assets. This leads them to follow strategies with occasional outstanding results, but that are less protable on average.

SEO in the Forex Broker space

The FX space is competitive. Very competitive. Top brokers post earnings in the hundreds of millions per year and the total retail market volume is almost $5 trillion a month. FXCM and Forex.com alone spent more than $17 million on advertising in Q1. Publishers the better for it (FXstreet posted earnings of 515K a month) – there is a huge incentive to do well in the search engines’ organic results. This post looks at the SEO efforts of GFT Forex, Forex.com, FXCM and Oanda, four well known US forex brokers.

I rarely read an article about SEO and Forex, the last time I heard SEO and Forex in the same sentence was in a Blackhat SEO conference (they love forex because the affiliate programs are very lucrative for them). Bart Burggraaf shows the visible SEO strategy part of the biggest US forex brokers. Incomplete but interesting. As you probably know I changed the name of Mataf.net to forexticket and I opened a website per country (forexticket.co.uk, forexticket.fr, forexticket.jp…), I wanted to know if a multiple domain name could score better than a single domain in search engine result pages.

And… I will give you the result later

I noticed a divergence between the estimation and the real numbers. With the following chart I wanted to measure the divergence.

I use the numbers of Mataf and Fxstreet. I don’t share my data but fxstreet does.

Since last year the spread between the real numbers and the estimation is growing month after month.The difference between real and estimate numbers grows even if we share our datas.

If I use the average spread to correct Adplanners’s numbers I have the following statistics (statistics without correction can be found here):

• Forexpros continues to grow and seems to be now bigger than DailyFX
• I don’t know if the numbers provided by google are correct but, for the global statistics, march was not as good as I expected.
• My “real” numbers were 1.5 million visits, 985’000 unique visitors and 4.3 millions pageviews. The numbers given by Google Adplanner were 750’000 unique visitors, 1.2 million visits and 4.6 millions pageviews

I keep in mind the acquisition of Boursorama by Fimatex (Société Générale) in France at the beginning of 2002. The price was very high : 44 millions Euro (x36 price-earnings – to compare with x32 for EuroInvestor).  This acquisition has helped Fimatex to grow faster (108’000 account in 2001 vs 677’000 account in 2010) and to become the leader in trading online in France.

After my short experience with Synthesis Bank (now Saxo Switzerland) in 2006 I was not far to change the business model of Mataf.net. I thought about the opportunity to become a forex broker. I had a strong forex portal and the skills to optimize the website to collect leads. The choice between forex broker and portal was not easy but I think I made the better choice a the right time… My motivation is to build something, not to make a ton of money.

Today I see 5 differents business in the forex market:

• Social Networks (including forum). There are a lot of discussion about trading strategy, brokers… A serious broker has to hear the traders to know what they want and he has to work hard to offer them exactly what they want.
• Forex Portals. This is the biggest crossroads for traders. They can find news, tools, charts, informations, formations…
• Managed account. Most of them are IB.
• Brokers. I think they are too much for the forex market.
• Banks. They will acquire forex brokers because the forex market is ripe for biggest company.

If I had no limit my strategy would be:

• recruite a team to discuss with traders in social networks. I would contact the owner of forums and networks to work with them (and not against them as many brokers do).
• Turn my forex portal to a big news and tools provider. And I would optimize the conversion funnel to download my platform and to open account.
• Offer the best and simplest trading platform.

This is a complete strategy: You perfectly know the forex traders, you can offer them what they want, you have a source of leads, and you have a good trading platform.
OK it’s not enought to be a broker… but it a very good start.

I think, and I hope, that Saxo will follow this line with the acquisition of EuroInvestor.

If I had enough money I would certainly acquire a broker to do the same thing

• The global number of visits has grown from 14.5 million to 18.9 million in one year = +31%
• Forexpros has grown +184%, Forexcrunch +150% and myfxbook +169%.
• Global social networks has grown 68%, the growth is done by myfxbook and currensee (27%). mt4stats : (-39%)
• Other winners are trader-forex.fr (+25%), mataf.net and forexmagnates (+20%), forexfactory (+17%)…
• The losers are fx360.com (-41%), forex-tsd (-26%) and babypips (-13%)

Don’t forget that those numbers are just an indicator, they are not real numbers -Mataf didn’t grows from 1 million visits to 1.2 million (+20% ) but from 1.12 million to 1.46 million (+30%).- but it’s interesting to compare our website with the same tool.

2011 had started very well with a strong growth. This week the average of the number of visitors is not far from the highest of last year, which is a good indicator.

It’s the occasion to tell that FXCM and Mataf have renewed our exclusive partnership until the beginning of 2013…

• The growth rate is very good but I’m still paying my last modification on Mataf.net.
• Forexpros and MyFxbook will touch the sky.
• Fxstreet have passed a strong resistance.
• Currensee raised $12 millions but money is not enough…

In june I introduced 45 new languages on Mataf.net. It was not a big modification for the website but it was enought to destabilize search engines. I lost 30% of visitors in less than 3 weeks. I made some modification in the link structure (less links per page) and the visitors came back. Since the end of september all is normal. I didn’t followed the statistics very closely during the summer because I don’t think my heart would resist

September was not a fantastic month, I had 1.16 million visits with 750’000 unique visitors and 3.5 million pageviews, but october starts very very well.

And What about the forex industry?

• Forexpros is growing fastly.
• You can clearly see that I had a big problem last months.
• Forexfactory seems to have passed a big step.
• Social networks a still small but myfxbook widens the gap.