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How is Darwinex different from Zulu / eToro for an investor?

12 February 2016

Fellow user and blog sparring partner Vlad posed yet another insightful challenge. With his permission, I’m (this is Juan 🙂 replying with an open letter – hoping to get more of you engaged on the subject. Here we go!

Hi Juan,

How is Darwinex different from Zulu / eToro for an investor?

I watched this presentation where you answered this question from the trader’s perspective.

I’m just amazed by the amount of dumb money that Zulu attracts ($6.6M from some 8.7k followers on the top 3 ‘traders’ who don’t even operate on a live account). You mentioned previously in our conversations tens of millions in AuM at Darwinex in the future…but what will be the source of that and how is that audience targeted ? I’ve seen already Darwins that should have much more investor attention (TSB for instance).

I think the most logical target would be the mutual funds clients – but if Darwinex is not clearly positioned that way it would be shunned by them (ah, just another social trading platform) and by the typical Zulu/Etoro client (because they’re after huge returns in a short amount of time).

What are your thoughts on this ?

Darwinex competitor overview – and Challenge assessment

First, our take on the competitors you mention.

Zulutrade is closer to the gaming / gambling  than the asset management business. They clearly have found a sustainable (?) niche for their offer, or else they wouldn’t have been around for close to 10 years. We have no insider knowledge of their investor acquisition channels, but I presume it’s a combination of outbound online marketing and inbound affiliate networks. It all works because b-booking brokers pay handsomely for such leads.

On the plus side, they must make money from investors. They make money for some strategy providers (else why are they there?).

On the negative side, I doubt they make money for investors on average – which makes me think the kind of investors we’re after would not consider them.

This guy knew people

eToro adds different nuances.

They’re agency-only (no b-booking), which is a start. They are (or can afford) gifted marketers and communicators, so attracting investors doesn’t seem to be an issue for them.

What about attracting and or keeping good traders?

  1. When you’re charging 3 pip EURUSD spreads whether you’re A-Book or B-Book doesn’t really matter – who can beat those transaction costs? Why even try if there’s more competitive, non Cyprus regulated brokers out there?
  2. Regulation – copy trading is deemed investment advice by ESMA and many national regulators. Traders not carrying license for investment advice and allowing copy-traders could be breaching regulation in multiple jurisdictions. Is that a sustainable business model for George Soros?
  3. eToro doesn’t pay traders on investor success – which opens the incentive can of worms.
  4. eToro have no way to charge investors for success because copy-trading is a free-for all. Which means they don’t have a way to pay traders on success. Which means traders either don’t stay or leave.

This, in turn, creates a challenge in keeping the investors they claim to attract, because of:

  1. Regulation – see above
  2. Transaction costs – see above
  3. Trader offering – would George Soros consider publishing his trades on eToro?
  4. Risk management – it’s really hard for an investor not understanding leverage to make money even copying good traders
  5. Homogeneity in risk – few people understand how risk and reward interact with each other. Which means strategies on offer are not on a level-playing field

eToro clearly has made inroads in creating a brand, by framing the “investing with the crowd” concept. But if the millions of customers they claim to have attracted are still with them, why raise 30 million in 2014? You’d think that USD 73 MM from VCs should be enough to trigger a sustainable business? If their traders are so good, why not invest any of those 73 MM themselves?

Darwinex – self-Assessment

 

And now on to your questions – our own set of tough challenges:

  1. How does Darwinex plan to differentiate itself from “social trading” outfits?
  2. How does Darwinex plan to attract (the first) tens of millions of investment into DARWINs?
  3. Why haven’t investors noticed TSB and others (yet?)

Our goal from the get-go was to package independent traders into an investable asset class. Thus the DARWIN Exchange concept, and investments into proper regulation, neutral, agency-only (non-dealing desk) positioning, diagnostic and risk management technology and apples-to-apples comparable DARWIN risk. In our opinion, these are all pre-requisites – must have foundations – to create the “independent trader” asset class.

We’re no fools and know foundations are a necessary but not sufficient condition to get there. Even if some differentiation is visible to you (if you didn’t think we’re different you wouldn’t invest time into challenging us? :-), to get more mainstream investors to notice TSB we’ll need to overcome our own set of (HUGE) challenges:

  1. Communication: you (fellow Darwinex readers/early adopters) feel that we’re different, but we’re not good enough yet at explaining why. Every time you try to explain to someone what makes us different from eToro / Zulu and the point doesn’t come across in 10 seconds, we lose an opportunity for growth. Improved positioning is on its way – hope we get closer 🙂
  2. Credibility / trust by (good) traders : we’re doing at least some things right – else DARWINs like TSB (your pick, not mine, even if I agree more people should notice) wouldn’t list with us. BUT: AuM are still low to attract all good traders on board. We’ll shortly release technology to grow AuM faster.
  3. Investor credibility: we’re all (independent traders and Darwinex) sailing upwind. Every time a Zulu / eToro investor loses money, another bit of trader credibility dies. Given others (Currensee, Covestor, eToro, etc.) have failed where we’re trying, it won’t be easy – but we’re convinced it’s doable if TSB and others continue to join and stay.
  4. Investor exposure: Darwinex is little known in a small niche (social trading, etc.) that hasn’t yet reached mainstream. Both our general awareness and the concept of social investing (thank you, VC investors in eToro 🙂 are improving. Yet going mainstream will be expensive – and may well require our raising a series A from a VC.

I hate to admit it, but neither of the above will happen until we all catalyse an independent trader movement.

WATCH THE VIDEO IN THE LINK NOW – I SWEAR IT INSPIRED DARWINEX, I HOPE IT INSPIRES YOU + YOU WON’T UNDERSTAND WHAT FOLLOWS IF YOU DON’T 🙂

So here’s how TSB gets (the first) 50 millions of AuM.

Now Darwinex, then Tradeslide started doing weird things. This helped TSB & others understand that this time it was different. They joined. So did clean guys like 50 – who actually stuck out his neck for us when it was VERY risky. Then the DARWIN investor platform was finally ready, by which point TSB and others used their DARWINs to actively market to new potential investors. All along, they were credible because Darwinex was independent from all, made more money when investors won, and publicly listed everyone, including failed DARWINs, on a level playing field. The first investors tried with pea-nuts, and some picked the wrong guys until Vlad wrote a good blog post on how to screen DARWINs. Some investors noticed TSB, made some money & boasted about their own little secret profit source during a golf match. Darwinex launched something (r)evolutionary. More and more investors gave TSB & others a demo try. They had more fun than with stocks, so they tried with a couple of thousand Euros. They told other investors. Vlad told his own investors to diversify by investing both in his DARWIN and TSB. Eventually, the first 10 MM AuM joined. This was pea-nuts in the bigger scheme of the asset management business, but more than any of the independent managers on the Barclays CTA index was managing, so Darwinex started a PR campaign to get the fact out there. Traders who never knew Darwinex to begin with, and others who initially looked down on “another Zulu” joined. Aspiring traders realised TSB was making a killing without gambling his account, so they stopped trying to make 50% per month. This stopped their crashing – the first step in the evolution towards winning. Investors noticed. Darwinex raised 10 MM Series A to accelerate development and hired the creatives behind eToro’s video. They blew the ball out of the park with a video that went viral – because enough investors went public saying that they actually exchanged profits with independent traders etc.

You see what I mean. That’s our evolutionary dream come true. It might seem utopian now – but I tell you it’s a lot closer now than 2 years ago.

And the best part is, if we all work together, we’ll soon stop waking up at 4 AM with our favourite nightmare:

What comes first, the traders or the AuM

(In our – Vlad and mine – case it’s: which comes first, the investable traders or the investor assets under management).

So that’s how you get to (the first) 50 MM AuM:

  1. You risk your neck on a utopia worth trying
  2. You get a bunch of guys like TSB & 50 to join
  3. They do their very best to get a few investors to notice them
  4. Everybody pulls their weight sticking their neck out to contribute for everyone’s profit exchange
  5. Compound investor leverage kicks in
  6. Independent traders gradually, and then suddenly are “the secret asset class everyone should invest in”
  7. We all cross the chasm together

PS: A huge thanks to our first 1000 trading customers, the 300 beta investors and (currently) 28 guys working with Darwinex. Even more so to folks like 50 who not only joined, but actively stuck their neck / credibility out back when this was just a bunch of “losers” trading, writing & reading “loonie” blog-posts like this 🙂

So – on to our next blog post Vlad? Anyone else out there?

Last News

Trading Hours for US Presidents’ Day on 17th February 2020

4 February 2020

Please note that the following trading hours will apply on Monday 17th February 2020. All times are in GMT+0 (London) time. During this time spreads may be wider and liquidity may be thinner. Bank holidays may also give rise to changes in the applicable swap rates.   Commodities  Monday 17th Febuary 2020 XAUUSD 23:01 Sun – 17:59 […]

Please note that the following trading hours will apply on Monday 17th February 2020. All times are in GMT+0 (London) time. During this time spreads may be wider and liquidity may be thinner. Bank holidays may also give rise to changes in the applicable swap rates.

 

Commodities  Monday 17th Febuary 2020
XAUUSD 23:01 Sun – 17:59 Mon
XAGUSD 23:00:01 Sun – 17:59:50 Mon
XPTUSD 23:00:01 Sun – 17:59:50 Mon
XPDUSD 23:00:01 Sun – 17:59:50 Mon
XTIUSD 23:00:01 Sun – 17:44:50 Mon
XNGUSD 23:00:01 Sun – 17:44:50 Mon
Índices
J225 23:00 Sun – 18:00 Mon
SPX500 23:00 Sun – 18:00 Mon
NDX 23:00 Sun – 18:00 Mon
WS30 23:00 Sun – 18:00 Mon
US stocks
All CLOSED

 


The rest of the assets will trade according to their usual trading time. As always, at info@darwinex.com we’ll be happy to assist you!

Upcoming Holidays in China and Australia

23 January 2020

Please be aware that the Chinese New Year will take place between January 24th and January 30th. Furthermore, Australia Day will be held on January 27th. Kindly note that during this time spreads may be wider and liquidity may be thinner. Also, the following amended trading hours will apply on Monday 27th January 2020. Time in […]

Please be aware that the Chinese New Year will take place between January 24th and January 30th. Furthermore, Australia Day will be held on January 27th. Kindly note that during this time spreads may be wider and liquidity may be thinner.

Also, the following amended trading hours will apply on Monday 27th January 2020. Time in GMT+0 (London) time.


 

Indices  Monday 27th January 2020
AUS200 06:10 – 22:00

 


The rest of the assets will trade according to their usual trading time.

As always, at info@darwinex.com we’ll be happy to assist you!

apalancamiento esma

Opening of orders in the XPDUSD asset blocked until further notice

22 January 2020

Due to the global palladium shortage and the impossibility of offering reasonable spreads due to the lack of liquidity, we’ve blocked the opening of trades in the XPDUSD asset until further notice. For any questions, don’t hesitate to reach out to us here or, if it’s about your specific case, via email at info@darwinex.com.

Due to the global palladium shortage and the impossibility of offering reasonable spreads due to the lack of liquidity, we’ve blocked the opening of trades in the XPDUSD asset until further notice. For any questions, don’t hesitate to reach out to us here or, if it’s about your specific case, via email at info@darwinex.com.

apalancamiento esma

Upcoming Holiday In New Zealand Resulting In The Possibility Of Wider Spread

16 January 2020

Please be aware that there is a public holiday in New Zealand on Monday, January 20th during which spreads may be wider and liquidity may be thinner. For any questions, reach out to info@darwinex.com.

Please be aware that there is a public holiday in New Zealand on Monday, January 20th during which spreads may be wider and liquidity may be thinner. For any questions, reach out to info@darwinex.com.

Margin increase for XAUUSD (Professional Clients only)

9 January 2020

Our margin requirement for the XAUUSD asset for Professional Clients is changing on Friday (January 10th 2020) around 17:00 GMT due to the US-Iran uncertainty. The new margin requirement will be 2% as opposed to the previous 1%. It will remain in place until further notice and will affect both existing and new positions. Kindly […]

Our margin requirement for the XAUUSD asset for Professional Clients is changing on Friday (January 10th 2020) around 17:00 GMT due to the US-Iran uncertainty.

The new margin requirement will be 2% as opposed to the previous 1%. It will remain in place until further notice and will affect both existing and new positions.

Kindly make sure you have enough available margin and equity in your account for the new margin level.

Need help? Please do not hesitate to contact us at info@darwinex.com.

Darwinex Trading Hours for the 2019 Christmas & New Year Holiday Period

18 December 2019

Please find below the Darwinex Trading Schedule for the 2019 Christmas and New Year Holiday Period. All times are displayed in UK time (GMT) and changes to regular trading hours are highlighted in red.

Christmas is around the corner!

Please find below the Darwinex Trading Schedule for the 2019 Christmas and New Year Holiday Period. All times are displayed in UK time (GMT) and changes to regular trading hours are highlighted in red.

Also note that during the Cristmas and New Year holiday period spreads may widen and swaps may be affected by the ‘turn’ effect. The ‘turn’ effect is a phenomenon that exists in financial markets which is caused by supply and demand for funding over key dates such as year or quarter-end. This can create anomalies in the forward curves for certain currencies, and we are already beginning to see this priced into the year-end swap points that we receive from our liquidity providers.

Further, you may want to check out what happens if you want to buy/sell a DARWIN which has underlying trades open with different opening/closing times.

Christmas 2019

DARWINs Tuesday 24th December Wednesday 25th December Thursday 26th December
All DARWINs 22:05 Mon – 21:59 Tue Closed 22:05 Wed – 21:59 Thu
FX Tuesday 24th December Wednesday 25th December Thursday 26th December
All FX Instruments 22:04:01 Mon – 21:59:50 Tue Closed 22:04:01 Wed – 21:59:50 Thu
Commodities Tuesday 24th December Wednesday 25th December Thursday 26th December
XAUUSD 23:01 Mon – 18:29 Tue Closed 23:01 Wed – 21:59 Thu
XAGUSD 23:00:01 Mon – 18:29:50 Tue Closed 23:00:01 Wed – 21:59:50 Thu
XPTUSD 23:00:01 Mon – 18:44:50 Tue Closed 23:00:01 Wed – 21:59:50 Thu
XPDUSD 23:00:01 Mon – 18:44:50 Tue Closed 23:00:01 Wed – 21:59:50 Thu
XTIUSD 23:00:01 Mon – 18:29:50 Tue Closed 23:00:01 Wed – 21:50:50 Thu
XNGUSD 23:00:01 Mon – 18:29:50 Tue Closed 23:00:01 Wed – 21:59:50 Thu
Indices Tuesday 24th December Wednesday 25th December Thursday 26th December
AUS200 23:00 Mon – 03:30 Tue Closed Closed
STOXX50E Closed Closed Closed
FCHI40 23:00 Mon – 13:00 Tue Closed Closed
GDAXI Closed Closed Closed
J225 23:00 Mon – 18:15 Tue Closed Closed
SPA35 07:00 – 13:00 Closed Closed
UK100 23:00 Mon – 12:50 Tue Closed Closed
SPX500 23:00 Mon – 18:15 Tue Closed Closed
NDX 23:00 Mon – 18:15 Tue Closed Closed
WS30 23:00 Mon – 18:15 Tue Closed Closed
US Stocks Tuesday 24th December Wednesday 25th December Thursday 26th December
All US stocks 14:31 – 17:59 Closed 14:31 – 20:59
Crypto Tuesday 24th December Wednesday 25th December Thursday 26th December
All Crypto Instruments 22:05 Mon – 22:00 Tue 22:05 Tue – 22:00 Wed 22:05 Wed – 22:00 Thu


New Year 2020

DARWINs Tuesday 31st December Wednesday 1st January Thursday 2nd January
All DARWINs 22:05 Mon – 21:59 Tue Closed 22:05 Wed – 21:59 Thu
FX Tuesday 31st December Wednesday 1st January Thursday 2nd January
All FX Instruments 22:04:01 Mon – 21:59:50 Tue Closed 22:04:01 Wed – 21:59:50 Thu
Commodities Tuesday 31st December Wednesday 1st January Thursday 2nd January
XAUUSD 23:01 Mon – 21:59 Tue Closed 23:01 Wed – 21:59 Thu
XAGUSD 23:00:01 Mon – 21:59:50 Tue Closed 23:00:01 Wed – 21:50:50 Thu
XPTUSD 23:00:01 Mon – 21:59:50 Tue Closed 23:00:01 Wed – 21:59:50 Thu
XPDUSD 23:00:01 Mon – 21:59:50 Tue Closed 23:00:01 Wed – 21:59:50 Thu
XTIUSD 23:00:01 Mon – 21:59:50 Tue Closed 23:00:01 Wed – 21:59:50 Thu
XNGUSD 23:00:01 Mon– 21:59:50 Tue Closed 23:00:01 Wed – 21:59:50 Thu
Indices Tuesday 31st December Wednesday 1st January Thursday 2nd January
AUS200 23:00 Mon – 03:30 Tue Closed 23:00 Wed – 22:00 Thu
STOXX50E Closed Closed 23:00 Wed – 22:00 Thu
FCHI40 23:00 Mon – 13:00 Tue Closed 23:00 Wed – 22:00 Thu
GDAXI Closed Closed 07:00 – 21:00
J225 23:00 Mon – 22:00 Tue Closed 23:00 Wed – 22:00 Thu
SPA35 07:00 – 13:00 Closed 07:00 – 19:00
UK100 23:00 Mon – 12:50 Tue Closed Closed
SPX500 23:00 Mon – 22:00 Tue Closed 23:00 Wed – 22:00 Thu
NDX 23:00 Mon – 22:00 Tue Closed 23:00 Wed – 22:00 Thu
WS30 23:00 Mon – 22:00 Tue Closed 23:00 Wed – 22:00 Thu
US Stocks Tuesday 31st December Wednesday 1st January Thursday 2nd January
All US stocks 14:31 – 20:59 Closed 14:31 – 20:59
Crypto Tuesday 31st December Wednesday 1st January Thursday 2nd January
All Crypto Instruments 22:05 Mon – 22:00 Tue 22:05 Tue – 22:00 Wed 22:05 Wed – 22:00 Thu

 


As always, if you have any queries, please feel free to contact us at info@darwinex.com.

The Darwinex Team wishes you a Merry Xmas and a Happy New Year!

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