What Do You Get When You Combine Proprietary Trading and Social on Mobile? TopTradr

The UK-based FCA regulated asset manager, TopTradr Ltd., combines proprietary trading and social on mobile, making for a unique hybrid approach. During an exclusive interview with Forex Magnates, TopTradr's CEO, James Olden discussed the company's offering and key distinctions that point to an interesting business model, as we will report below.

While the term hybrid was reserved mostly by the great evolutionary theorist Charles Darwin to refer to cross-breeding, and related mutations, sterilizations and other theoretical phenomenon pertaining to the evolution of species across generations, the same can be said to be taking place comparatively speaking in the realm of online trading. Specifically in the following three fields:

Proprietary Trading
Mobile
Social

Having read just a few days ago about a solar-powered 3D printing machine that makes objects out of glass - using sand, If that is not a hybrid approach to innovation, not sure what is. Similarly, as far as a unique approach and sense of awe or bewilderment, TopTradr business model is a cross between a proprietary trading firm, a mobile application that uses social to sift through successful traders and allocates them firm's capital (just as a prop-shop would to a group of traders at a local office).

Forex Magnates' Interview

During an interview with Forex Magnates' research team and TopTradr's CEO James Olden, we asked James what the driver behind creating Toptradr was, and he said:

"I wanted to create something that I, as a trader, would enjoy using. I was extremely skeptical of other platforms which promoted ‘Guru’ traders making a 500%+ returns on all their trades. I didn’t want to copy trades, I wanted to see how I fared against other decent traders out there. It wasn't so much about recognition for me as it was verification as to how I was performing - trading used to be a somewhat souless activity, so building a community of like-minded ‘serious’ traders made a lot of sense."

At first glance at the company website, the perception format of the prize offering resembled that of a typical forex brokerage deposit-bonus offering a or related marketing promotion.

However, after further inspection of the site and during the call with Mr. Olden, TopTradr's CEO, it was quickly discovered that there is a lot more than meets the eye, for the firm's business model.

Not Your Typical Trading Contest

Noticing the references to FXCM, I asked Mr. Olden whether FXCM had any direct interest in his company to which he confirmed no, and explained how FXCM was a natural choice to help align his product with a global broker, and how Toptradr is open to other brokers and looking to expand its offering.

TopTradr Leaderboard view on Android [Source: Google Play]

According to people close to FXCM, the relationship with TopTradr is that of a tied agent (from a legal perspective) which is common - whether such agents are introducing brokers or technology providers (in order to help comply with meeting related regulatory obligations).

At its essence, TopTradr aims to operate just like any other proprietary trading firms that search for the best talent to manage the firm's capital by first scouting and teaching traders to generate good risk-adjusted returns, and then allocating company money to the fittest traders, or in this case those who are on the "Top."

When asked during our interview, whether other larger plans were underway, Mr. Olden said, "We have developed a large audience in the Far East, HK and China in particular. To best accommodate our users we will be including Chinese language functionality in V2 (to be released in 2014). There are lots of other exciting features that we plan to implement in the next release, such as featured traders and subscribed groups, so watch this space!"

Social Selection, Darwinian Fitness Test

By combining the power of the social aspects of trader's history shared across the firm's network, every trader is openly competing for a piece of the allocations by TopTradr.

Example of achievements and badges traders can earn [TopTradr Android Version [source: Google Play]

The ranking, which helps determine the fittest trader - is done by a proprietary algorithm that looks to incorporate more than just the standard risk/reward performance rankings, and results in a score that traders are given - which changes dynamically as trading performance updates in real-time.

The TopTradr score uses a rolling forward look back of the last 20 trading days, giving new traders the ability to rise to the ranks quickly, and older track records less weight, as only the last few weeks are considered.

The most successful trader is allocated a weekly amount (prize) of $37,500 that is to be managed via a Limited Power of Attorney (LPOA) of which only a percentage of any profits (via high-watermark) can be withdrawn - just as a performance fee that proprietary trading firms would pay out to successful traders (or that an investor would pay a fund manager based on profit sharing).

Forex Magnates had previously covered a similar business belonging to TradeSlide, which although is structured quite differently - appears to share several parallels with regards to social aspects and creating an investable trader (but for retail investors). Also comparable is Currensee's Trade Leader program, except that with TopTradr the funds are allocated instead of raised or solicited from investors.

Proprietary Trading via Mobile

Mr. Olden explained that his choice for keeping the offering mobile is because that is where he believes the future of trading will be, as the convergence from desktop to mobile continues for many brokerage providers and in other verticals outside of finance (i.e. Instagram,etc.). The various achievements that traders can be awarded, including a $1million dollar allocation to manage, help to provide a strong incentive.

In reviewing the Android version of the TopTradr app, running it on an Android 4.2 version environment, the installation was smooth (at 14mb size file) and upon launching the program the ability to login with Facebook was quick, thereafter users are prompted to select a user name and provide an email.

During the next step, a choice is given to either link to an existing live account (in this case from FXCM) or to set up a new demo account. In choosing demo, with one touch the demo was set up and then pointed to the app profile screen.

At this point, realizing that the app also requires the brokers' mobile platform to be installed, and in a way piggybacks off it, a search on the Google Play market was necessary to install the brokers mobile Trading Platform app for Android.

That is, in order to use the TopTradr app with FXCM, traders need to also install the FXCM Trading Station Mobile app (also at 15mb file size), and then both can be synced. After installing theFXCM app, the TopTradr app was launched again and the Trade button was pressed which launched the FXCM app asking for user login credentials, and the option to register for a demo.

After logging in to the FXCM mobile app, using the newly registered demo, on the bottom left hand corner of the interface - TopTradr - appeared which upon pressing the button prompted the application to ask to exit (out of FXCM), thus launching the TopTradr app (indicating the Sync appeared complete).

App Review for Android, and Anti Copy Trading

While the customer journey can be different depending on the approach, this whole process, while it might seem like a lot to do on a smartphone or tablet device, is really just about the same steps that would be required on a web-based browser seen on a laptop or desktop computer (when syncing an account/signing up for a service).

As mobile device usage continues to replace the share of time spent by users on desktop and laptop computers, this indeed seems to concur with the expectations of future trends with the convergence of the two segments.

TopTradr Android Version [source: Google Play]

Last but not least, while TopTradr's concept may appear to share aspects of social copy trading, it actually doesn't.

The firm purposefully doesn't allow copy trading, since traders must first become eligible to receive allocations, and even then are restricted to trading their capital alongside any allocated firm's money (so in essence they get to copy their own trades on to the firm's capital - if looked at from a different perspective) but again no trader is given a way to copy another trade - so copy trading or mirror trading is not part of the functionality by design.

Traders do however collaborate and compete, and are able to share trades on Twitter and Facebook and are involved in that social side of trading.

In the end, the net result of this offering is that it is unique, however also shares things in common with certain others segments of the market (hence my reference to the term hybrid) while purposefully not including others.

Like natural selection, except made by conscious decision based on predetermined criteria and an innovative approach.

As competing trader ranking aggregators look to attract users, it will be interesting to track TopTradr's progress and plans for Asia uncovered during our interview -including its intent on offering TopTradr to other brokers.

Proprietary Trading
Mobile
Social