Improving trust in trading through education

When peo­ple new to trad­ing open an account with a for­eign exchange (FX) or con­tract for dif­fer­ence (CFD) bro­ker, they are often faced with an over­whelm­ing­ly com­pli­cat­ed trad­ing plat­form. Not know­ing where to start, they look at edu­ca­tion tools pro­vid­ed by the bro­ker. These tools tend to be too the­o­ret­i­cal for peo­ple new to trad­ing to under­stand the core con­cept of trad­ing: risk man­age­ment. Even expe­ri­enced traders can suf­fer from a lack of prac­ti­cal edu­ca­tion avail­able to them.

Instead, trad­ing plat­forms focus on cre­at­ing a trad­ing envi­ron­ment with mea­sures designed to enable trades to be placed quick­ly. This, togeth­er with a lack of rel­e­vant edu­ca­tion­al tools, can eas­i­ly lead to emo­tion­al trad­ing, which almost always results in a long-term loss.

“Unfor­tu­nate­ly, user edu­ca­tion in this space is some­what lack­ing, and, even though the indus­try has come a long way, we can still make it bet­ter,” says Pavel Spirin, chief mar­ket­ing offi­cer at Skilling. “Hav­ing per­son­al­ly gone through the learn­ing curve to try to under­stand the depth of lever­aged trad­ing, I have seen a few exam­ples where a well-devel­oped approach to edu­ca­tion was not the pri­ma­ry objec­tive.

“The edu­ca­tion­al tools and pack­ages cur­rent­ly offered by some bro­kers are either too gener­ic and the­o­ret­i­cal or too tech­ni­cal and over­whelm­ing. Some pro­vide edu­ca­tion sim­ply to ful­fil reg­u­la­to­ry require­ments, as opposed to work­ing with their cus­tomers to pro­vide the most effec­tive approach to edu­ca­tion.”

The result is an over-reliance on inde­pen­dent indus­try blogs and online spe­cial­ist videos to com­pre­hend ful­ly how the trad­ing sec­tor works. Good edu­ca­tion not just explains the basics of CFD and wider lever­aged trad­ing, but also teach­es the most fun­da­men­tal aspect of trad­ing, which is risk man­age­ment and approach to risk. The less emo­tion­al, more diver­si­fied and hedged traders are, the more suc­cess­ful they gen­er­al­ly are.

“An edu­cat­ed trad­er is a smarter trad­er, and smarter traders are less sus­cep­ti­ble to emo­tion­al trad­ing, which allows them to devel­op good risk dis­ci­pline and a con­sis­tent trad­ing strat­e­gy. The result is sus­tain­able trad­ing and long-term gains for both the trad­er and the bro­ker,” says Mr Spirin.

Non-trans­par­ent pric­ing struc­tures add fur­ther chal­lenges for traders. Often infor­ma­tion about bro­ker fees is pre­sent­ed in obfus­cat­ed terms, and users only learn about them after they have placed their trades.

Some bro­kers dis­play prof­it or loss in gross terms, while charg­ing cost of trade fees lat­er, cre­at­ing a dis­con­nect between what traders see as their cur­rent prof­it or loss and their actu­al realised prof­it or loss once their posi­tions have been closed. An exam­ple of such prac­tice is when rollover fees or swaps are not clear­ly shown to traders until they close their posi­tions. This, in turn, can wipe out oth­er­wise prof­itable trades, espe­cial­ly in cas­es when traders hold their posi­tions for a long time and, as a result, accu­mu­late rollover fees or swaps.

Reg­u­la­tors have sought to intro­duce mea­sures to help pro­tect traders in Europe, includ­ing the Euro­pean Secu­ri­ties and Mar­kets Authority’s rul­ing in August 2018 to restrict lever­age offered by bro­kers to retail cus­tomers in the Euro­pean Eco­nom­ic Area to 1:30 on FX and 1:5 on shares CFDs. This has put more pres­sure on clients’ own funds, how­ev­er, which in turn has cre­at­ed more pres­sure for bro­kers to be more trans­par­ent about their full fee struc­ture, accord­ing to Mr Spirin.

“Although MIFID II and nation­al reg­u­la­tors have man­dat­ed for bro­kers to dis­close all costs asso­ci­at­ed with CFD trades, with empha­sis to present them ‘clear­ly’, these reg­u­la­tions, at this time, do not go far enough to explic­it­ly say how exact­ly these costs should be dis­played and what ‘clear­ly’ is ‚” Mr Spirin says.

We are com­mit­ted to upskilling traders of all lev­els to become suc­cess­ful, as we believe in cus­tomer suc­cess through edu­ca­tion

“My view is that pric­ing is still not a ful­ly trans­par­ent con­cept, and it’s still left to bro­kers to decide how they want it to be pre­sent­ed to their cus­tomers. Trans­paren­cy is a foun­da­tion of trust, and trust is a core con­cept in this sec­tor. It’s dif­fi­cult to man­age risk and ongo­ing prof­it or loss if you don’t ful­ly under­stand the cost of trad­ing you’re engaged in.”

Skilling is com­mit­ted to bridg­ing the gap in the cur­rent trad­ing expe­ri­ence through a unique approach to edu­ca­tion. It advo­cates on-demand con­tex­tu­al edu­ca­tion with heuris­tics at its heart, serv­ing edu­ca­tion when it’s con­tex­tu­al­ly rel­e­vant and need­ed for the cus­tomer to do a spe­cif­ic action.

“We have a very strong foun­da­tion from vet­er­an Scan­di­na­vian dig­i­tal busi­ness lead­ers – our founders – and are lucky enough to have an expe­ri­enced and tal­ent­ed man­age­ment team,” says Mr Spirin. “We’ve spent over three years devel­op­ing a tru­ly user-friend­ly trad­ing plat­form with cus­tomer expe­ri­ence, trust, trans­paren­cy and edu­ca­tion as its core pil­lars.

“There is a rea­son we called our­selves Skilling: we are com­mit­ted to upskilling traders of all lev­els to become suc­cess­ful, as we believe in cus­tomer suc­cess through edu­ca­tion. We present every­thing in sim­ple, non-mis­lead­ing terms that our cus­tomers will under­stand. We focus heav­i­ly on pro­vid­ing an amaz­ing cus­tomer expe­ri­ence, as well as sim­ple, but com­pet­i­tive, pric­ing.”

Skilling’s pric­ing is dis­played on its trad­ing infor­ma­tion page, and they also show the full cost of each trade in the order tick­et, includ­ing indica­tive gain or loss in the cus­tomer account cur­ren­cy. The bro­ker has also designed an edu­ca­tion­al tool called Skilling Trade Assis­tant for users who wish to learn more about how lever­aged trad­ing works and how bro­ker fees are cal­cu­lat­ed.

The tool is designed to be ful­ly con­tex­tu­al­ly rel­e­vant to what the cus­tomer is active­ly doing. It takes a cus­tomer through a num­ber of steps required to place a trade, con­tex­tu­al­ly over­lay­ing key trad­ing con­cepts, such as lever­age, stop loss and take prof­it. By click­ing on each of these con­cepts, the cus­tomer can learn more about them through very short, one- or two-sen­tence expla­na­tions and dynam­ic exam­ples.

They strive to make trad­ing fair­er and more acces­si­ble, which is sure to result in fur­ther reg­u­la­tion in the years ahead. With more strin­gent require­ments and stan­dards will come an even greater demand for trans­paren­cy and wider eth­i­cal prac­tices.

“With our core com­pa­ny val­ues being trust, trans­paren­cy, cus­tomer expe­ri­ence and edu­ca­tion, we wel­come such changes,” says Mr Spirin. “We’ll be work­ing with both reg­u­la­tors and indus­try thought lead­ers to cre­ate a safe, trust­wor­thy, trans­par­ent and reg­u­lat­ed envi­ron­ment for exist­ing traders and those who want to start trad­ing.”

For more infor­ma­tion please vis­it skilling.com