Improving trust in trading through education

When people new to trading open an account with a foreign exchange (FX) or contract for difference (CFD) broker, they are often faced with an overwhelmingly complicated trading platform. Not knowing where to start, they look at education tools provided by the broker. These tools tend to be too theoretical for people new to trading to understand the core concept of trading: risk management. Even experienced traders can suffer from a lack of practical education available to them.

Instead, trading platforms focus on creating a trading environment with measures designed to enable trades to be placed quickly. This, together with a lack of relevant educational tools, can easily lead to emotional trading, which almost always results in a long-term loss.

“Unfortunately, user education in this space is somewhat lacking, and, even though the industry has come a long way, we can still make it better,” says Pavel Spirin, chief marketing officer at Skilling. “Having personally gone through the learning curve to try to understand the depth of leveraged trading, I have seen a few examples where a well-developed approach to education was not the primary objective.

“The educational tools and packages currently offered by some brokers are either too generic and theoretical or too technical and overwhelming. Some provide education simply to fulfil regulatory requirements, as opposed to working with their customers to provide the most effective approach to education.”

The result is an over-reliance on independent industry blogs and online specialist videos to comprehend fully how the trading sector works. Good education not just explains the basics of CFD and wider leveraged trading, but also teaches the most fundamental aspect of trading, which is risk management and approach to risk. The less emotional, more diversified and hedged traders are, the more successful they generally are.

“An educated trader is a smarter trader, and smarter traders are less susceptible to emotional trading, which allows them to develop good risk discipline and a consistent trading strategy. The result is sustainable trading and long-term gains for both the trader and the broker,” says Mr Spirin.

Non-transparent pricing structures add further challenges for traders. Often information about broker fees is presented in obfuscated terms, and users only learn about them after they have placed their trades.

Some brokers display profit or loss in gross terms, while charging cost of trade fees later, creating a disconnect between what traders see as their current profit or loss and their actual realised profit or loss once their positions have been closed. An example of such practice is when rollover fees or swaps are not clearly shown to traders until they close their positions. This, in turn, can wipe out otherwise profitable trades, especially in cases when traders hold their positions for a long time and, as a result, accumulate rollover fees or swaps.

Regulators have sought to introduce measures to help protect traders in Europe, including the European Securities and Markets Authority’s ruling in August 2018 to restrict leverage offered by brokers to retail customers in the European Economic Area to 1:30 on FX and 1:5 on shares CFDs. This has put more pressure on clients’ own funds, however, which in turn has created more pressure for brokers to be more transparent about their full fee structure, according to Mr Spirin.

“Although MIFID II and national regulators have mandated for brokers to disclose all costs associated with CFD trades, with emphasis to present them ‘clearly’, these regulations, at this time, do not go far enough to explicitly say how exactly these costs should be displayed and what ‘clearly’ is ‚” Mr Spirin says.

We are committed to upskilling traders of all levels to become successful, as we believe in customer success through education

“My view is that pricing is still not a fully transparent concept, and it’s still left to brokers to decide how they want it to be presented to their customers. Transparency is a foundation of trust, and trust is a core concept in this sector. It’s difficult to manage risk and ongoing profit or loss if you don’t fully understand the cost of trading you’re engaged in.”

Skilling is committed to bridging the gap in the current trading experience through a unique approach to education. It advocates on-demand contextual education with heuristics at its heart, serving education when it’s contextually relevant and needed for the customer to do a specific action.

“We have a very strong foundation from veteran Scandinavian digital business leaders – our founders – and are lucky enough to have an experienced and talented management team,” says Mr Spirin. “We’ve spent over three years developing a truly user-friendly trading platform with customer experience, trust, transparency and education as its core pillars.

“There is a reason we called ourselves Skilling: we are committed to upskilling traders of all levels to become successful, as we believe in customer success through education. We present everything in simple, non-misleading terms that our customers will understand. We focus heavily on providing an amazing customer experience, as well as simple, but competitive, pricing.”

Skilling’s pricing is displayed on its trading information page, and they also show the full cost of each trade in the order ticket, including indicative gain or loss in the customer account currency. The broker has also designed an educational tool called Skilling Trade Assistant for users who wish to learn more about how leveraged trading works and how broker fees are calculated.

The tool is designed to be fully contextually relevant to what the customer is actively doing. It takes a customer through a number of steps required to place a trade, contextually overlaying key trading concepts, such as leverage, stop loss and take profit. By clicking on each of these concepts, the customer can learn more about them through very short, one- or two-sentence explanations and dynamic examples.

They strive to make trading fairer and more accessible, which is sure to result in further regulation in the years ahead. With more stringent requirements and standards will come an even greater demand for transparency and wider ethical practices.

“With our core company values being trust, transparency, customer experience and education, we welcome such changes,” says Mr Spirin. “We’ll be working with both regulators and industry thought leaders to create a safe, trustworthy, transparent and regulated environment for existing traders and those who want to start trading.”

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