CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. -- % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Brokernomics, a #DarwinexUnCut Mini-Series

Our CEO Juan Colón and CDS Ali Saif (himself also a retail trader) have started a #darwinex-uncut mini-series about “Brokernomics”. Inspired by the popular economics book Freakonomics, our goal is to emphasize the need for all retail market participants to understand how their brokers really work, inside out.

Brokernomics (1) - Introduction

A broker is a complex machine, its inner workings not having much in the way of publicly available information.

With this series of conversations, Juan attempts to describe the inner workings of this complex machinery. The better you understand how we work, the better we are able to serve you at the end of the day.

Brokernomics (2) - Direct Acquisition

In the 2nd part of the series Juan talks about Direct Acquisition of clients by brokers.

He sheds light on how much it costs for example, to a highly reputable, major, well-established brand and broker like IG, to onboard a new customer, when on average the company breaks even after spending the money to onboard the customer, and what the cumulative lifetime value of that customer is to the company.

Juan also explains why Darwinex does not and will not spend large sums in upfront advertising costs to attract clientele, relying exclusively on existing clients’ recommendation and word of mouth.

Important note

The IG Group example in this conversation serves to both appreciate and demonstrate the scale at which large, successful brands like IG operate. Darwinex respects IG and congratulates them for their success, and does not consider IG as its competitor - different target client niches altogether.


Enjoy… and stay tuned as more is to come soon! We’d like to encourage you to let us know if you’d like us to cover anything specific in this series. Just reply here or easily send us a voice message.

Support material to the series

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Brokernomics (3) - Indirect Acquisition

This next segment of the Brokernomics Series, is about:

  • Indirect Acquisition e.g. through affiliates / introducing brokers
  • How the Darwinex Business Model is not designed to support this form of client acquisition and the reasons / conflicts of interest issues behind why this is so

Available on Soundcloud, Spotify, RSS. Enjoy!


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Brokernomics (4) Why Darwinex Was Born & Organic Acquisition

This episode of the #darwinex-uncut Brokernomics mini-series is about organic acquisition of customers by brokers.

Very much related to the theme, our CEO delivers heart-felt reasoning behind WHY Darwinex came into being.

He sheds light on the motivation, the people behind the effort, why the world needed YET ANOTHER broker (to solve the problem he goes on to describe).

From Forex conferences in Cyprus, oddly good-looking girls and race cars, to brokers not wanting to source nor develop technology to actually IMPROVE trader and investor outcomes…

… Juan revisits history, describing how all of this drove him and his brother to setup their own retail brokerage to drain the swamp, to bring meritocracy and fair odds back to the retail financial landscape.

He PULLS NO PUNCHES in this video… people need to hear these things as they are, without sugar-coating, Armani suits and gimmicky sales effects.

Expect harsh truths, and lots of swearing… but most of all, the BRUTAL realities of the financial industry that Darwinex was born for - and works hard every day - to change.



We’re keen to receive your comments here or, if you’d like to be a part of one of the next episodes, via voice message from speakpipe.com/Darwinex.

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Brokernomics (5) - The Chicken & Egg Debate: A vs. B vs. Hybrid Books

The next episode of the #darwinex-uncut Brokernomics series is about the current Darwinex business model, emphasizing the following:

  1. Why Darwinex does not operate a B-Book (the vision, ethos and motivation behind the decision).

  2. How Darwinex could be making millions of €€€€ more IF it were to B-book clients, and how under an agency model, its ultimate vision is to help its clients grow and succeed.

  3. How, for customers to succeed, Darwinex has to work hard to help traders become better traders.

  4. How, for Darwinex to do that, it must endeavour to provide the best possible trading conditions to reduce transaction costs and help traders retain more of their returns.

  5. Pre and post-ESMA impact.

  6. Why Darwinex relies solely on organic acquisition, and cannot do direct or indirect acquisition of clients like other brokers who do operate B-Books.

Juan talks about spread capture books, and makes a transparent case for WHY and WHAT Darwinex does operationally to provide better execution conditions for micro-ticket orders… which its Prime Brokers cannot process directly to market and are internalizing such flow themselves anyway!

Enjoy!


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Brokernomics (6) - Why Client Retention is Key

In this segment of the #darwinex-uncut Brokernomics series @juancolonbo talks about:

  1. Client retention in terms of both users and equity, why it is fundamental to the success of Darwinex and the TraderMovement.

  2. Pre and post-ESMA impact on client outcomes, changes in the evolution of client equities and more.

  3. Why Darwinex has an Organic Growth strategy that relies on helping traders and investors become better versions of themselves, survive longer and further the reach of the ecosystem that is Darwinex, to the wider masses.

He goes through some very interesting thought experiments to make his point… you’re encouraged to watch the video in its entirety for more details :).

In addition to Juan’s inputs, Ali Saif (CDS at Darwinex as well as DARWIN Provider @integracore2 behind $PLF) briefly shares his experience as a trader of roughly 14 years.

He describes the early days of not knowing nor understanding how the markets nor trading truly worked, blowing accounts, experiencing various psychological dispositions from euphoria to disappointment etc… to how he evolved over time not just as a trader, but as an individual in the process… lessons that can only be learned by going through the process.

Enjoy!


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Brokernomics (7) - Do CFDs Move The Market?

In this segment, Juan answers one of the most frequent questions we receive from the trading community: Do CFDs move the market?

Juan emphasizes the need to understand what CFDs are and how they operate, going through a series of examples demonstrating what exchange actually takes place during CFD transactions, and under what circumstances CFDs could indeed move the market.

Enjoy!



You’re encouraged to send your questions and comments related to this series via voice message. You can do this easily via Speakpipe.

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Brokernomics (8) - Our Technology Stack

In this segment, Juan talks about the technology stack used by Darwinex in processing tens of billions of $$$ worth of our trading community’s order flow every month.

He describes in visual detail how data moves through our Hosting, Trading Platforms and Aggregation Engine layers.

Enjoy!


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A lot of valuable and interesting content! Thanks.

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Brokernomics (9) - How & Why Swaps Are Charged

This session of the #darwinex-uncut Brokernomics series is about swaps: what they are and why and how they are charged to traders.

Leveraging publicly available information, Juan highlights important considerations for the retail trading industry at large as regards swaps and transaction costs in general.

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Brokernomics (10) - Why agency brokers must charge swaps

In this new episode, Juan talks about why Darwinex charges higher swaps than market makers do.

He describes this in the context of how - as an agent - Darwinex is passing on the flow of risk from the client onward to the broader market, to external counter-parties that take on the other side of clients’ trades (i.e. make the market they’re trading), and how swaps factor into the picture.

Enjoy!

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Brokernomics (11) - Psychological Impact of Trading Industry Norms

This episode of the #darwinex-uncut Brokernomics mini-series is about the psychological, financial, circumstantial and emotional impact and side effects on traders, of the way the retail trading industry has been run by most brokers so far.

Juan details historically how him and his brother Javier Colón (co-founder of Darwinex) embarked on setting up Tradeslide back in the day, to empower traders to become better traders.

But the industry was full of brokers at the time who simply weren’t interested at large in the same vision.

To be a venue that attracted “Alphas” - traders with the attitude, motivation and drive required to improve and succeed - Tradeslide needed to become its own Agency Broker and hence create the fair, level playing field that was missing in the retail trading industry, particularly in retail Forex / FX at the time.

The brokerage arm of Darwinex was hence born.

We are typically our clients’ 3rd or 4th broker - and this is good for us (in one sense) because before getting to us, people have already had unfavourable experiences with most others and immediately appreciate the difference we bring to the table.

But historically, Traders should never have had to experience systematic exposure to conditions biased entirely in brokers’ financial interest, ever. This industry norm to date has created psychological imbalance among traders on a grand scale.

We see too much in the way of distrust, discontent, bitterness and suspicion towards brokers as a result (Darwinex included).

The only way we have to make our case, that we are not in the business of profiting from people’s misfortune, that we are in the business of empowering traders to succeed, is by giving them the tools and the level playing field necessary to succeed.

But to accomplish this mission, Darwinex needs traders to viralize our message, to spread the word as far and wide as they can.

If you’re an Alpha, if you’re a serious Trader looking to scale your game to the next level, to turn your talent into a scarce commodity where investors compete to back you with capital…

… help Darwinex spread the word, and do it with gusto, with all your might!

Because you deserve it.


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Brokernomics (12) - Is the % of losing traders relevant when picking a broker?

In this episode of Brokernomics we ask ourselves whether the % of retail clients that lost money in the last year -an information CFD brokers are obliged to publish and update every 3 months- is relevant as an input when picking a broker.

A well-meaning but somehow misguided effort by the regulator to take vulnerable people out of trading, this measure ignores, among others, that every trader who eventually becomes successful, needs to learn to trade first. And that during this period of learning, will lose money.

Juan analyses to what extent a broker can influence the performance of its traders, highlighting also the role of transaction costs and volatility on this performance. Finally, ESMA’s 2018 leverage limitation receives due credit as the real game changer when it comes to reducing client losses.

Enjoy!

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Brokernomics (13) - What Causes Flash Crashes?

If you’ve been trading for some years, chances are you remember more than one so-called “flash crash”.

This video is about what flash crashes are and how they come about.

We cover:

  • What can trigger a flash crash
  • What happens next, after the trigger event
  • What’s the role of stop orders
  • How leverage exacerbates the crash

We also touch upon how liquidity fragmentation relates to flash crashes. We explain liquidity fragmentions with available information about US commission-free broker Robinhood.

To know more about liquidity fragmentation, read this 2019 letter to shareholders by Interactive Broker CEO Thomas Peterffy.


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