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Trading is Intellectual Property: the proof is Coke!

10 February 2014

Ever wondered what the common ingredient to trades, trading algorithms and Coke is?

Easy! Intellectual Property!

Agree that speculation is an IP industry? To understand the full implications for your trading income, look no further than Coca Cola: a lesson on capturing – or missing out on – the dividends accruing to intellectual property.

The origins of Coca-Cola (hat tip wikipedia)

Colonel John Pemberton was wounded in the American Civil War, became addicted to morphine, and began a quest to find a substitute to the dangerous opiate. The prototype Coca-Cola recipe was formulated at Pemberton’s Eagle Drug and Chemical House in Columbus, Georgia, originally labelled coca wine.

Insight 1: True intellectual property, like a successful trading strategy, is the valuable product of hard, sustained effort.

He may have been inspired by the formidable success of Vin Mariani, a European coca wine. In 1885, Pemberton registered his French Wine Coca nerve tonic (…) essentially a non-alcoholic version of French Wine Coca.

Insight 2: Your strategy’s IP could inspire others roaming the markets!

The first sales were at Jacob’s Pharmacy in Atlanta, Georgia, on May 8, 1886. It was initially sold as a patent medicine for five cents a glass at soda fountains.

Insight 3: IP has a value – no-one who has worked hard to develop a successful trading strategy gives it away for free!

With that in mind, look closer at the Coke ticket (a beauty, BTW)

First Coca Cola Ticket

Notice the Trademark Logo – IP Protection. This way you had no way to use the logo (IP!) without 1) advertising Coke and 2) incurring in legal risk.

Insight 4: Successful creators protect the IP they disclose!

Insight 5: Successful market the product of IP but do NOT, repeat DO NOT, disclose their IP!

The business model of IP is to disclose, for a price,  the product of the IP, not the IP itself! Coke buyers paid for a glass of patent medicine: they enjoyed the product of the IP (they drank it!), but NEVER, EVER got anywhere close to the formula (patent!). Pemberton (literally!) locked the formula in a vault to make sure that there was one and only one way to drink Coca Cola: to pay Pemberton for it, every time. 

Wonder what happens if you don’t do that? Look no further than… Coke!

Pemberton was diligent in withholding IP from customers… alas not from partners. By 1888, three versions of Coca-Cola were sold by three separate ¨partners¨ who laid hands on the formula.

Insight 5: IP, just like your trading strategy, benefits ANYONE deploying it. When disclosing your IP, you’re waiving (some or all of) the future profits it generates!

Result? The Pemberton family, like the inventor of Vin Mariani before them, lost Coca Cola to those who got access to the formula, and made the most of it.

Insight 6: IP benefits copiers as much (if not more) than inventors: IP leakage hurt Pemberton, but it hurt the inventor of Vin Mariani so much, that we even ignore his name!

Trading lessons?

If you didn’t already, now you know. Your trades ARE the product of your intellectual property.

If you absolutely must, tweet your trades, sell your algorithm or explain your strategy and charting set-ups in your blog. But beware:

  • If you disclose it all in one go, you could end up the unknown (= forgotten!) French guy who invented Vin Mariani (the Coca Cola),
  • If you disclose it trade by trade, remember that valuable IP WILL BE reverse-engineered. Trades are NOT the IP itself, they’re the key to the vault. Incidentally, this is the reason why Darwinex will NEVER publish the track-record of our members. We sure certify that it is true, but that’s no excuse to compromising your IP!
  • If you’re pitching to manage investor capital, DON’T disclose so much IP in your pitch that others can then replicate your strategy!

At all times, remember Pemberton:

  • By all means, rent the IP: allow investors to benefit from your IP via fees… but
  • NEVER give so much of your formula away that investors can replicate it without paying you going forward!
  • Before tweeting, realize that markets learn 24/7. Once you disclose IP you will (at best) share the success of your intellectual property.

PS: if the content of this post sounds too trivial to you… feel free to recommend it to good traders roaming forums, engaging in mirror-trading / copy trading / social trading sites. Looks like they missed it: trading is Intellectual Property!

 

Last News

FCHI40 and SPA35 Equity Index CFDs Available for Shortselling Again

20 May 2020

As France and Spain have lifted the shortselling ban introduced in March, we’ve enabled the opening of short positions in the FCHI40 and SPA35 Equity Index CFDs.

As France and Spain have lifted the shortselling ban introduced in March, we’ve enabled the opening of short positions in the FCHI40 and SPA35 Equity Index CFDs.

US Memorial Day & UK Spring Bank Holiday on 25th May 2020

19 May 2020

Please note the amended Darwinex trading hours for the upcoming US Memorial Day & UK Spring Bank Holiday on Monday 25th May 2020. All times are in UK (BST) time.

Please note the amended Darwinex trading hours for the upcoming US Memorial Day & UK Spring Bank Holiday on Monday 25th May 2020. All times are in UK (BST) time.

Important: if you open / close an investment in a DARWIN that has an open trade in an asset with the market closed (see amended trading hours in red below), the transaction will not be carried out immediately. The operation will show up in your investor portfolio once it has been executed by our system when the index/commodity resumes trading on Monday night.

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

Commodities   Monday 25th May 2020
Gold 23:01:00 Sun – 17:44:00 Mon
Silver 23:00:01 Sun – 17:59:50 Mon
US Crude 23:00:01 Sun – 17:44:50 Mon
US Natural Gas 23:00:01 Sun – 17:44:50 Mon
Indices
UK100 CLOSED
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 US stocks CLOSED

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

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XTIUSD trades enabled again

8 May 2020

After disabling XTIUSD trades last month, we’ll enable it again at Monday’s market open (11 May 2020).

After disabling XTIUSD trades last month, we’ll enable it again on Monday’s market open (11 May 2020).

Please note that, given the current market situation, the following conditions will apply to XTIUSD trades.

  • Margin requirement will be 20% both for Retail and Professional Clients.
  • If the hypotethical case of the price dropping below $5.5, we’ll be closing all client positions in the market. We’ll do this at the last price received from our Liquidity Provider which might be not exactly $5.5. This measure is due to the fact that MetaTrader’s and our Liquidity Provider’s infrastructure is not designed to support negative pricing.

Do not hesitate to contact us at info@darwinex.com should you need assistance in this regard.

Margin increase for the Turkish lira (TRY) starting today

We’d like to inform you that our margin requirement for the Turkish lira will be increased today for both Retail and Professional Clients.

We’d like to inform you that our margin requirement for the Turkish lira will be increased today for both Retail and Professional Clients.

The new margin requirement will be 20% as opposed to 10% before.

This change is a security measure due to an increase in market uncertainty surrounding the TRY with liquidity expected to be extremely thin over the following days. Swaps are expected to widen as well.

The change will take effect today May 8th 2020 5 after pm BST and will apply to both existing and new positions.

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

Need help? Please don’t hesitate to contact us at info@darwinex.com.

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Upcoming Holiday in Japan resulting in the possibility of wider spreads and thinner liquidity

29 April 2020

Please be aware that there are public holidays in Japan on 4 May, 5 May and 6 May. Please kindly note that during this time spreads may be wider and liquidity may be thinner.

There are public holidays in Japan on May 4, 5 and 6. Kindly note that 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.

Don’t hesitate to contact us at info@darwinex.com if you have any questions regarding the above.

UK100 closed on 8th May 2020

28 April 2020

Please note that on Friday 8th May 2020, the UK100 index CFD will be closed due to bank holiday in the United Kingdom.

Please note that on Friday 8th May 2020, the UK100 index CFD will be closed due to bank holiday in the United Kingdom.

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!

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.