We wrote last week about the extent to which retail investor money was contributing to growth in international foreign exchange trading, and to what extent Mrs Jones — the personification of the average yield-seeking western investor — was gaining ground on her Japanese equivalent Mrs Watanabe.
We also warned about the array of technological algorithms being marketed to Mrs Jones via the internet and other methods, in a bid to guide her inexperienced hand while promising in some cases far-fetched returns of more than 20 per cent a month in forex trading.
We dubbed her Mrs Robo-Jones, and wondered to what degree she may or may not be being taken advantage of.
Accordingly, it is with great interest we note that it’s not just the smaller FX platforms and little known internet-based outfits now making a special effort to attracti Mrs Jones and her money to their services. Deutsche Bank’s strategy via online retail foreign exchange offering dbFX appears just as heavy handed.
As Wall Street and Tech reported on Friday:
dbFX, Deutsche Bank’s online retail foreign exchange (FX) trading platform is using social media sites such as Twitter, YouTube, Facebook and Linkedin to connect with FX traders and attract new visitors to the dbfx.com site.
The Twitter page is updated regularly by dbFX staff members and offers news and updates from the team, including announcements of futures webinars and seminars and market information.
The dbFX team has uploaded about 13 video tutorials onto YouTube demonstrating how to use the dbFX trading platform, as well as an introduction to the Dr. Doug Hirschhorn video series on the ‘Psycholo9gy of Trading.’
“Our clients are highly sophisticated users of online tools and we want to be able to better engage with them in a format that is most efficient and convenient,” stated Betsy Waters, global director, dbFX. “Social media offers opportunities for instant dialogue and information sharing which is key for traders in the dynamic FX market place,” added Walters in the company’s release.
Highly sophisticated users of online tools they may be, but not necessarily forex markets.
If you watch the YouTube advertorial, by the way, you’ll find Dr Doug Hirschhorn “market psychology coach” (PhD sports psychology), explaining the “mental game” of forex to help customers navigate the markets.
We would point out that:
- dbFX is a margin trading platform — which means unsophisticated Mrs. Jones can take out as much as 100:1 or 50:1 leverage on her account (although the small-print does say this is conditional on experience).
- dbFX offers its services to institutions and hedge funds, meaning Mrs. Jones is trading alongside the world’s most sophisticated investors.
- dfFX’s automated services present the opportunity to “plug into an existing program, while trading with the quality pricing of the world’s No 1 FX Bank” — suggesting some element of performance guarantee.
As dbFX’s own client agreement states regarding leverage:
In addition to standard industry disclosures contained in this Agreement, you should be aware that margined currency trading is one of the riskiest forms of investment available in the financial markets and is only suitable for sophisticated individuals and institutions. While on the matter of execution:3.3 We may combine your orders with orders for our own account or the account of our affiliates or with those of other customers. By aggregating your orders with those of other customers we must reasonably believe that it is unlikely that the aggregation would work overall to the disadvantage of those customers. At least in dbFX’s case though — unlike some other platforms heavily targeting retail investors — clients can, we hope, be assured of genuinely competitive spreads and the peace of mind of trading with a respected, heavily regulated counterparty in the form of Deutsche Bank. Nevertheless, the trend is worrying.Forex trading is hugely risky, margin-trading even more so — aggressive internet marketing tactics targeting the financially unaware should be questioned.
Related link:
Mrs. Robo Jones starts to make an FX impact - FT Alphaville