Primary research

Author: Patrick Jordan for Gain Capital, May 2016

Internal interviews: key insights

We captured the undocumented knowledge about our clients that we have in Gain

What attracts people to online trading

Making money is overwhelmingly the main reason people are attracted to trading
Hope for bigger and quicker returns that investing
Freedom, challenge, excitement and image are emotional benefits for many
Often events and circumstances attract people to trading (e.g. VW Scandal, possibility of Brexit)
Trading volume correlates with market volatility
For many the decision to trade is on impulse
Low rate of conversion from demo to live trading

Common characteristics of online traders

Overwhelmingly male
Comfortable with risk

Differences between groups of traders

Traders differ with respect to: experience, competence, attitude to risk, fundamental v. technical, financial resources
Many young men see it as a chance to make easy money and get rich quick (‘Wolf of Wall Street’ Attitude)
Older people tend to be more systematic and cautious
Younger people usually more tech savvy
Women more risk adverse than men
Difference between those who know about trading and those just taking a punt
Two kinds of novices: those who are new to online trading and those who are new to trading as a whole
Some do training before trading some don’t

Factors that have biggest influence on how happy/unhappy people are when trading

Whether they are making a profit is by far the biggest issue
Platform usability
Platform stability and reliability
Quality of tools provided (e.g. charts, new)
Quality of client services

Why people lose money

Don’t understand risk management
Get the direction right but run wrong
Lack strategy and try and pick top and bottom of the market
Rush to get going without education first
Think it will be easy money

Biggest opportunities

Attracting Millennials
Switchers are high value because they trade regularly and need less help
Mobile is the fastest growing area
Social trading
Help clients trade more successfully

Interviewees
Nicholas Scott Emma Shen Jonathon Shen Skyler Tang Daniel Sleeman Sixto Alonso Craig King Shane Braustein Ben Flint Iain Fry Richard Gloess Jack Gorgon	Hiroaki Umezawa Nanako Fukada Takayoshi Takano Ainsley Kuppler Benjamin Leith Luke Miller Warren Ruhoman Dina Grochowski Steve Kerrick Allison Cashmore Wes Newman Ian O’Sullivan	Lex Webster Ken Odeluga Fawad Razaqzada Vikki Pead Daniel Gladding Lisa Fox Chung Lee Khalid Flynn Thien Ohan Daniel Frostick

Takeaways

The desire to make money is something that all traders have in common
Many come to trading due to high-profile events or market volatility
Traders are overwhelmingly male
They range in attitude from those who want to get rich quick to those who are making a serious commitment to learning trading
Whether they are making money is by far the biggest determinant of how positive a user’s experience is, but the vast majority don’t
Lack of strategy, discipline and risk management are the most common reasons for this
Attracting new users and attracting switchers are both big opportunities

Ethnography: City Index tutorials (James Chen)

We took some tutorials with James Chen to understand the basics of trading

Tutorial	Insights
Introduction to Trading the Financial Markets	Even a mediocre trader can make money if they manage risk properly Trend, pullback, breakout (TPB) is a good system for new traders “If your rational for a trade proves wrong, get out”
Getting Started with Trading: Platforms and Tools	Understand how to set stop losses and profit limits Understand different order types: market, entry, OCO Understand support and resistance lines
Technical and Fundamental Analysis Overview	Fundamentals: what you have to know is different for different markets Technical analysis: can be applied across markets Learn to use tools such as moving averages and oscillators
Basic Trading Tools and Techniques	It is very difficult to trade news: most lose Profits should be a multiple of risk It is important to have a proper system for entering trades

Takeaways

Even a basic trading strategy can be profitable as long as it is applied diligently

Managing risk and sticking to a system is essential

It is important to grasp the use of tools such as stop losses, profit limits and simple technical analysis tools

User observation, interviews, trading analysis

We spoke to some of our clients, watched them trading and looked at their records

User	Observations	Trading pattern	Insights
Ben B (UK)	Developed habits through trials and error Uses charts analysis with various indicators Trades a variety of projects	Overall loss on his first 200 trades but an overall profit on the 300 since then Lots of small losses and occasional big wins	Has learned from early mistakes Very disciplined about cutting losses, running profits
Julian M (UK)	Only uses phone to trade Not much analysis Uses stops and limits	1st 250 trades many losses and occasional wins: overall modest profit 300 since: 50% win rate overall big losses	Started in a disciplined way and was profitable despite low win/loss ratio Lost discipline when started trading bigger amounts, running big losses
Kiril K. (UK)	Trades multiple instruments Tends to stick to markets he knows rather than trying new things Holds positions from 1-3 days	Losses over first150 trades Profitable over next 100 Catastrophic run of 4 large losses wiped out gains Now gains again	Learned from early mistakes Started to be disciplined but seemed to lose it temporarily leading to one big loss which caused a downward spiral of 3 more
Bruce T (Hong Kong)	Does some analysis from charts Doesn’t trust analysts views Has technical issues with the platform sometimes	Has placed over 350 trades Very poor ratio of winning trades Running losses No improvement Lost over £ 3000	Has shown no sign of any improvement over the course of his trading Appears to be repeating the same mistakes continually
Peter R (UK)	Lost a lot of money in the 1987 crash Feels has the wrong psychology for trading (emotional and stubborn)	Has been analyzing algorithms Selected one and is using Few trades so far but profitable	Seems very self aware Is using the algorithm as feels that it will take the psychology out of trading which he sees as his weak point
Frank R (UK)	Thought he knew it all at the start Lost a lot of money Returned and learned properly Now consistent modest profit Only trades in morning when fresh	Big early losses Now pattern of consistent gains over series of trades	Early mistakes provided a wake up call Motivated to succeed so studied properly Has changed his attitude and realises how hard trading is and that discipline required
Kyle O (UK)	Does a lot of news analysis Trades cautiously using stops and limits Had traded with IG but felt he was betting against them so couldn’t win	1st 250 trades many losses and occasional wins: overall modest profit 300 since: 50% win rate overall big losses	Started in a disciplined way and was profitable despite low win/loss ratio Lost discipline when started trading bigger amounts, running big losses
Francesco R. (UK)	HNW client who has been traded for 2 months Lost $ 150,000 in that time Occasionally looks at charts but no analysis	Tends to have lot of small wins followed by much larger losses Has traded 500 times in his first two months	Is essentially punting Doesn’t understand the basics of trading Overleveraged leaving himself with £ 100K exposure, panicked and closed all trades
Abdul S. (UK)	Trades indices at £5 per point Mainly uses web Invested but sees trading as totally different game Started trading as perceived few investment opportunities in market	Stake size is small compared to his account Has become profitable over 5 month period (PnL +$1320)	Understands the risk of trading Manages risk and emotions through small stake size
Jonathan A (UK)	Trades in the evening Puts orders on the Dow at 9pm after it closes Aiming to leverage up in the long term	Has done around 250 trades over 1.5 years Increasing stakes and slight improvement in performance Still negative PnL	No sign of significant improvement or a particularly systematic approach Has ran losses and cuts profits from the start and still does
Erik L (Sweden)	Trades currency pairs for three hours each evening Experiments with different strategies and evaluates	Early losses have now been replaced by consistent gains Broken even after six months	Has taken a through and ‘scientific’ approach Learned by ‘thoughtful trial and error’
Idris O (UK)	Former professional trader Now trades for self Chart based Tries to be disciplined but sometimes emotionally difficult	Generally successful and disciplined Occasional ‘gung-ho’ trade if gets over excited	Although can get emotional he is aware of this and take it into account when setting up trades Has stops and limits in place
Alan S (UK)	Likes to stake small amounts (e.g. 50p/point) Trades indices and individual shares Trades about three times per day Sometimes in and out quickly, sometimes holds over night Tries different approaches and indicators to see what works best	Has a pattern of lots of small losses followed by the occasional large win However also has he occasional large loss so has an overall loss (-£500 in 12 months)	He seems to be experimenting in order to find a successful approach but hasn’t managed to achieve this yet Not clear whether his experimenting is helping him learn or whether he is simply jumping from one thing to another
Robert C. (UK)	Has been interested in trading for a long time Did a lot of training Looking for a winning system Doesn’t have much time to trade Uses Twitter for getting tips	Has been trading for 7 years Lost -$16K	Has been looking for a winning strategy Not found one Difficult to fit trading around his work Not been able to give it sufficient time to make progress
Mark T. (UK)	Was originally interested in binary options Got into share trading as a result Trades lots of different products and markets Chart based using over 100 indicators Working on building his own system	Has now been trading for over six months Different timescales of trades (scalping vs. longer) Not yet profitable	Gave up job to trade full time Living with his parents although in early 50s Trying to learn Maybe going too broad to start with, narrower focus might be better
Jamal I (UK)	Comfortable with risk Mainly uses gut instinct Likes excitement Doesn’t understand pounds/point Not clear about how to place stops and limits	Trading for 2.5 years Lost $865 Started with shares and commodities, then switched to forex Trades intermittently for a couple of hours in the morning or evening	Despite trading for 2.5 years has not grasped even the basics of trading Claims that he doesn’t mind if he wins or loses as it is interesting anyway
Daniel C (UK)	Trades indices and individual shares Has bet and played poker online Trades in first 15 minutes of various markets opening Believes that providers often ‘rip-off’ their clients: says had ‘phantom spike’ and got stopped out when trading with IG (which is why he left them)	Has lost $505 over 6 months Tends to put small stake sizes and takes profits after 3 or 4 point moves Tried different systems which he says are ‘each successful for a short while’ Emotions depend on the size of the win or loss	Although he may appear to be experimenting with systems he is doing little analysis In effect he is ‘punting’ a lot of the time Tends to put his losses down to bad luck and his wins to trading skill
Ben A (UK)	Started with IG Felt that got ripped off got stopped out during a spike that he says did not appear on the FTSE itself Works full time, trades in the evenings	Only just started with CI so little data Hasn’t traded much recently because can’t set indicators	Says that’ any profit is a good profit’ which suggests that he is cutting his gains Gets quite emotional while trading: loves winning and hates losing
Stephen M. (UK)	Carpenter by trade Very interested in maths Uses mathematical analysis Trades indices Fairly calm	Just started trading $75 profit in 2 months Trades from 8-9.30 & 3-4pm £ 1/point Approx 15 trades/day Loses more than wins but runs gains and cuts losses	Understands the need to gain an edge and feels that mathematical analysis is the only way Disciplined Doesn’t get emotional “If trade isn’t going to work get out and try another one”
Tarun P. (UK)	Wife had some spare money and they decided to trade in the hope of getting a better return than in banks Buys options and holds until they expire	Has made few trades Profit of $2.8K in 5 months	Trades a narrow product set Relies on news largely Realistic expectations
Matthew L. (UK)	Developed a system using 12 month charts Based on the idea that a share, index or currency has a floor Trades from 7-8 am; 2:08- 2:30; 3:30; 4:30 and 5:30 as these as “fastest growing peaks of the day” Self-taught; aims to become full-time trader	Has never had crystallised a losing trade Has sufficient funds to avoid margin calls so far Likely to be a ‘time bomb’	This is a highly risky strategy which is likely to end in a big crash eventually Mirrors the kinds of strategy that are sometimes seen on social trading leaderboards
Martin P. (UK)	Became interested in trading after 2008: was curious how it happened Retired: prefers to trade for first 2-3 hours of the morning Learning to code script and produce own signals from charts	Trades up to 25p per point at the moment Not going to do more until after 200 trades	Tends to be cautious perhaps, maybe to the point of impeding his progress as he is not doing enough trades to learn

User

Observations

Trading pattern

Insights

Ben B (UK)

Developed habits through trials and error

Uses charts analysis with various indicators

Trades a variety of projects

Overall loss on his first 200 trades but an overall profit on the 300 since then

Lots of small losses and occasional big wins

Has learned from early mistakes

Very disciplined about cutting losses, running profits

Julian M (UK)

Only uses phone to trade

Not much analysis

Uses stops and limits

1st 250 trades many losses and occasional wins: overall modest profit

300 since: 50% win rate overall big losses

Started in a disciplined way and was profitable despite low win/loss ratio

Lost discipline when started trading bigger amounts, running big losses

Kiril K. (UK)

Trades multiple instruments

Tends to stick to markets he knows rather than trying new things

Holds positions from 1-3 days

Losses over first150 trades

Profitable over next 100

Catastrophic run of 4 large losses wiped out gains

Now gains again

Learned from early mistakes

Started to be disciplined but seemed to lose it temporarily leading to one big loss which caused a downward spiral of 3 more

Bruce T (Hong Kong)

Does some analysis from charts

Doesn’t trust analysts views

Has technical issues with the platform sometimes

Has placed over 350 trades

Very poor ratio of winning trades

Running losses

No improvement

Lost over £ 3000

Has shown no sign of any improvement over the course of his trading

Appears to be repeating the same mistakes continually

Peter R (UK)

Lost a lot of money in the 1987 crash

Feels has the wrong psychology for trading (emotional and stubborn)

Has been analyzing algorithms

Selected one and is using

Few trades so far but profitable

Seems very self aware

Is using the algorithm as feels that it will take the psychology out of trading which he sees as his weak point

Frank R (UK)

Thought he knew it all at the start

Lost a lot of money

Returned and learned properly

Now consistent modest profit

Only trades in morning when fresh

Big early losses

Now pattern of consistent gains over series of trades

Early mistakes provided a wake up call

Motivated to succeed so studied properly

Has changed his attitude and realises how hard trading is and that discipline required

Kyle O (UK)

Does a lot of news analysis

Trades cautiously using stops and limits

Had traded with IG but felt he was betting against them so couldn’t win

1st 250 trades many losses and occasional wins: overall modest profit

300 since: 50% win rate overall big losses

Started in a disciplined way and was profitable despite low win/loss ratio

Lost discipline when started trading bigger amounts, running big losses

Francesco R. (UK)

HNW client who has been traded for 2 months

Lost $ 150,000 in that time

Occasionally looks at charts but no analysis

Tends to have lot of small wins followed by much larger losses

Has traded 500 times in his first two months

Is essentially punting

Doesn’t understand the basics of trading

Overleveraged leaving himself with £ 100K exposure, panicked and closed all trades

Abdul S. (UK)

Trades indices at £5 per point

Mainly uses web

Invested but sees trading as totally different game

Started trading as perceived few investment opportunities in market

Stake size is small compared to his account

Has become profitable over 5 month period (PnL +$1320)

Understands the risk of trading

Manages risk and emotions through small stake size

Jonathan A (UK)

Trades in the evening

Puts orders on the Dow at 9pm after it closes

Aiming to leverage up in the long term

Has done around 250 trades over 1.5 years

Increasing stakes and slight improvement in performance

Still negative PnL

No sign of significant improvement or a particularly systematic approach

Has ran losses and cuts profits from the start and still does

Erik L (Sweden)

Trades currency pairs for three hours each evening

Experiments with different strategies and evaluates

Early losses have now been replaced by consistent gains

Broken even after six months

Has taken a through and ‘scientific’ approach

Learned by ‘thoughtful trial and error’

Idris O (UK)

Former professional trader

Now trades for self

Chart based

Tries to be disciplined but sometimes emotionally difficult

Generally successful and disciplined

Occasional ‘gung-ho’ trade if gets over excited

Although can get emotional he is aware of this and take it into account when setting up trades

Has stops and limits in place

Alan S (UK)

Likes to stake small amounts (e.g. 50p/point)

Trades indices and individual shares

Trades about three times per day

Sometimes in and out quickly, sometimes holds over night

Tries different approaches and indicators to see what works best

Has a pattern of lots of small losses followed by the occasional large win

However also has he occasional large loss so has an overall loss (-£500 in 12 months)

He seems to be experimenting in order to find a successful approach but hasn’t managed to achieve this yet

Not clear whether his experimenting is helping him learn or whether he is simply jumping from one thing to another

Robert C. (UK)

Has been interested in trading for a long time

Did a lot of training

Looking for a winning system

Doesn’t have much time to trade

Uses Twitter for getting tips

Has been trading for 7 years

Lost -$16K

Has been looking for a winning strategy

Not found one

Difficult to fit trading around his work

Not been able to give it sufficient time to make progress

Mark T. (UK)

Was originally interested in binary options

Got into share trading as a result

Trades lots of different products and markets

Chart based using over 100 indicators

Working on building his own system

Has now been trading for over six months

Different timescales of trades (scalping vs. longer)

Not yet profitable

Gave up job to trade full time

Living with his parents although in early 50s

Trying to learn

Maybe going too broad to start with, narrower focus might be better

Jamal I (UK)

Comfortable with risk

Mainly uses gut instinct

Likes excitement

Doesn’t understand pounds/point

Not clear about how to place stops and limits

Trading for 2.5 years

Lost $865

Started with shares and commodities, then switched to forex

Trades intermittently for a couple of hours in the morning or evening

Despite trading for 2.5 years has not grasped even the basics of trading

Claims that he doesn’t mind if he wins or loses as it is interesting anyway

Daniel C (UK)

Trades indices and individual shares

Has bet and played poker online

Trades in first 15 minutes of various markets opening

Believes that providers often ‘rip-off’ their clients: says had ‘phantom spike’ and got stopped out when trading with IG (which is why he left them)

Has lost $505 over 6 months

Tends to put small stake sizes and takes profits after 3 or 4 point moves

Tried different systems which he says are ‘each successful for a short while’

Emotions depend on the size of the win or loss

Although he may appear to be experimenting with systems he is doing little analysis

In effect he is ‘punting’ a lot of the time

Tends to put his losses down to bad luck and his wins to trading skill

Ben A (UK)

Started with IG

Felt that got ripped off got stopped out during a spike that he says did not appear on the FTSE itself

Works full time, trades in the evenings

Only just started with CI so little data

Hasn’t traded much recently because can’t set indicators

Says that’ any profit is a good profit’ which suggests that he is cutting his gains

Gets quite emotional while trading: loves winning and hates losing

Stephen M. (UK)

Carpenter by trade

Very interested in maths

Uses mathematical analysis

Trades indices

Fairly calm

Just started trading

$75 profit in 2 months

Trades from 8-9.30 & 3-4pm

£ 1/point

Approx 15 trades/day

Loses more than wins but runs gains and cuts losses

Understands the need to gain an edge and feels that mathematical analysis is the only way

Disciplined

Doesn’t get emotional

“If trade isn’t going to work get out and try another one”

Tarun P. (UK)

Wife had some spare money and they decided to trade in the hope of getting a better return than in banks

Buys options and holds until they expire

Has made few trades

Profit of $2.8K in 5 months

Trades a narrow product set

Relies on news largely

Realistic expectations

Matthew L. (UK)

Developed a system using 12 month charts

Based on the idea that a share, index or currency has a floor

Trades from 7-8 am; 2:08- 2:30; 3:30; 4:30 and 5:30 as these as “fastest growing peaks of the day”

Self-taught; aims to become full-time trader

Has never had crystallised a losing trade

Has sufficient funds to avoid margin calls so far

Likely to be a ‘time bomb’

This is a highly risky strategy which is likely to end in a big crash eventually

Mirrors the kinds of strategy that are sometimes seen on social trading leaderboards

Martin P. (UK)

Became interested in trading after 2008: was curious how it happened

Retired: prefers to trade for first 2-3 hours of the morning

Learning to code script and produce own signals from charts

Trades up to 25p per point at the moment

Not going to do more until after 200 trades

Tends to be cautious perhaps, maybe to the point of impeding his progress as he is not doing enough trades to learn

Takeaways

Some traders make the same mistakes over and over again without improving

Others refine their systems and learn from their mistakes

Losing control of emotions can be catastrophic even for the best of traders