According to research, approximately 50% of traders quit before they make 40 trades, contributing around 10% to the entire re-deposit rate. Another interesting finding is that less than 1% of traders made more than 1000 trades overall. However, they contributed 47% of the broker’s overall deposit rate.
Before we try to find the answer to the million dollar question of “why,” we need to decide if a high turnover is a good or bad thing.
If you were talking to a broker, you would probably get the response that it most definitely is. But high turnover might actually be natural. After all, it makes sense for someone to take $200 and try their luck in 20 trades, getting a feel for the whole thing. When that person quits, the broker sees it as a churn just because he has to pay high CPAs. However, maybe it isn’t even a churn. From bored housewives to curious students, perhaps a large portion of the trader population is actually made up of one-timers who enjoy the rush, lose their money, and then move on with their lives.
So now that we have cleared that up, it’s time to break our question down into smaller pieces to get a better understanding of why traders quit. Those traders who are not just one-timers quit trading for a number of reasons: perhaps they were not successful, perhaps their experience with the broker was negative, or thousands of other reasons. If we were to get into the head of the trader, maybe we would be able to adopt better retention practices that would make traders stick around longer.
One can actually divide traders into a number of different profiles. First, there are one-timers who are going for another round of trades. Though they aren’t intending to spend more money on trading, these people might still be open to suggestions. Therefore, if a sensible offer reaches them, they could be inclined to keep trading.
Then there are the high-rollers. These are the traders who intend to spend large amounts of money just for the thrill.
People with some extra investment cash may be looking to make high gains quickly. They will likely make several deposits along the way, with their only goal to make a high score.
Lastly, there are the irrational traders. They act against reason and generally without a clear strategy. The more they lose, the harder they try, and eventually become indifferent to their losses and gains, instead trading with no apparent control.
Why is this important
If you are a broker, all you have to do is understand which trader belongs to which group. The best way for you to learn this is to ask them directly, in case they are willing to discuss that. Otherwise, you could look at their trading patterns and make a conclusion.
Finally, one last bit of advice – you should always be as honest as you can with traders and never push them into something they can’t afford. This will increase the chances that they will come back to trade with you rather than a competing brand.