Customer retention strategies in trading using behavioural science

The ability to keep clients is the key to any successful organisation. It generally involves building strong brand loyalty and giving your clients an experience that exceeds their expectations. However due to the nature of trading, typical client retention strategies can often have a low impact. Trading is an emotional and volatile experience. It can involve irrational and rushed decision making and result in both extreme highs and lows. It is also very difficult for a trader to last. All brokers have a strong interest in reducing trader churn - so where and how can a broker assist in keeping traders happier, and trading for longer?

In an industry where many traders lose, give up quickly, or switch brokers without a second thought, a serious analysis of client retention strategies is due.

Behavioural science helps us understand traders more accurately, because it looks at their behaviour rather than their beliefs. Essentially, it studies how people act, rather than how they think they act. We might think we are risk averse, but we buy lottery tickets. We might think we’re long-term savers, but we rack up credit card debt. We might think we’re focused on winning trades, but we stay in losers much longer. Behavioural science acknowledges that human beings make irrational and emotional decisions.

We can think of decision making in our brains as two different systems.

System 1: A fast, automatic, involuntary, subconscious system where decisions are made fast and quick.

System 2: The “conscious” system where we think about, deliberate, imagine, and analyse the world around us.

You might think you make the most of your decisions in system 2, but that is not the case. It’s labour and energy-intensive, so our default is system 1. We choose easy, automatic solutions because they ‘feel right.’

As much as traders believe they are rational and logical, they in fact often base their decisions on rules of thumb, experience, and shortcuts (system 1), rather than undertaking a careful cost & benefit or data analysis to arrive at the best decision (system 2). A classic example is waiting to enter the markets at a certain price. Your system 2 has planned to enter at price X. The market is trading above this price for a while, and you are afraid of never getting filled and losing a large upside. You have a moment where you are convinced that you are missing out, so you buy at a higher price. The stock never rises, and you are in a losing trade, against your plan and with no exit strategy. This is your system 1 overriding your system 2.

Surrounding traders with the correct behavioural nudges helps to mitigate these risks. Such nudges are not guaranteed to always work, but they are part of a process where traders can learn and eliminate their most costly mistakes with practice. We are going to look at 3 different customer retention strategies in this paper, that nudge a trader from system 1 to system 2 thinking or use a trader’s system 1 thinking to their benefit.


One common method in customer retention is rewards. In the trading industry, we’ve seen a recent increase in cashback and rebates to high volume clients, but there are other methods that can be just as effective.

Let’s look at the neuroscience behind rewards. All forms of reward are processed in the brain’s master reward centre and are experienced as rewarding feelings. These feelings are based in system 1 - they are automated and instinctive, and we are not conscious of why we’re feeling them.

Our brains do not necessarily rate financial rewards higher than non-financial rewards. Rewarding your customers with non-financial rewards will trigger the same sense of reward feelings.

The best way to do this is to focus on rewarding the trading process, and not the trading outcomes.

The most undisciplined trades can make money. Rewarding purely for the outcome sets up the wrong mental association for a trader. The emotion of the win becomes the learned behaviour and reinforces high risk behaviour in traders to try and repeat the feeling.

Rewarding for process might trigger a reward for successfully closing a losing position within a trader’s risk tolerance. Targeting and sticking to a decent risk-to-reward ratio is achievable in both winning and losing traders and using rewards to keep traders focused on this important metric will re-enforce good trading discipline and lead to better results. Trading success is directly correlated with the trader’s level of discipline.

Rewarding traders for a disciplined day will generate the reward feelings that trigger happiness and satisfaction in traders. People respond to positive reinforcement when they’ve carried out a good action, and the happy feeling they experience. A paramount point is that it is time sensitive. The positive reinforcement needs to be instantaneous.

This can be particularly effective with new traders, to instil a habit of good discipline from the start. We know it takes time to master the art of trading, so instilling confidence and a sense of achievement in new traders will provide the encouragement they need to keep trading and keep learning. This doesn’t just work to get the trader more on board with you as a broker, it also aids their success. You’ll increase their confidence and drive short-term goal achievement and long-term behaviour change. Knowing how you are doing along the way, particularly at the beginning of a journey, generates higher overall achievement and success.

The journey

It’s one thing to retain traders who would have switched to another broker – but what about the traders who quit trading completely? How do we keep them?

The answer to this lies in the customer journey. A trader needs to be engaged throughout the life cycle - and to do this requires both system 1 and system 2 engagement. We recommend that the experience for a day 1 trader should be different to a day 100 trader which should be different to a day 1,000 trader. What’s more is that you shouldn’t be able to jump from each of the stages of the journey. You must earn it organically.

If we’ve invested resources into something, we find it difficult to just give it up. We don’t want to “lose” the money, time, and effort we’ve already invested, so we allow ourselves to stay with it because of the emotional attachment.

A great way to create this sense of investing is by personalising your service, and by making a trader work for some features. It separates new traders from more experienced traders and acknowledges the difference in the trading journey.

There is effort involved for the trader in this, and it requires finding the right balance of effort and ease.

Divide your traders into cohorts and structure your offerings in tiers, with personalisation available to the more experienced cohorts.

For example, we only give new traders a limited number of features, and they need to close more trades before they can unlock the more sophisticated features. They have to “work” for them.

Not only does this create a unique trading journey it also removes choice paralysis for beginners. This is the behavioural science idea that too much choice leaves us confused and fearful, so faced with too many options we choose either no action or go with the default.

We also don’t give the less experienced traders a choice with their trading guardrails. We mandate that new trades stick to small risk levels in terms of their trading capital per trade, and they must earn the right to increase this with more trading experience. Some of the experienced traders still choose our recommended guardrails, but the paramount point here is that they themselves choose it. As a trader becomes more experienced, they unlock more sophisticated features such as seeing their psychological strengths and weaknesses. We are engaging them in the entire trading journey, creating a strong attachment that will improve retention.


To change behaviour, we have to change environments, not beliefs. As we’ve said, beliefs don’t truly motivate a person’s behaviour. You change traders’ behaviour by changing their environment. Your environment is anything from where you trade, what time of day it is, or even what you are eating.

Let’s look at the example of timing.

Proper timing is crucial to control outcomes. For example, people are more agreeable after eating. A famous experiment was done on eight parole judges in Israel. The judges devoted an average of 6 minutes deliberating on each case, and 35% of requests were approved. But after eating, the judges’ approval score increased to 65%. The approval rating steadily dropped the longer the time since eating, to about 0% right before a mealtime.

We only have a limited number of cognitive resources. When we’re hungry, we expend all our resources on thinking about that and find it difficult to think about anything else. Once we have eaten, we are satisfied, and not only can think of other things, but are more agreeable about them. Think about how your supermarket experience changes when you shop both before you have eaten and after you have eaten.

Most of us would think our decision making wouldn’t be so dependent on something as irrelevant as when we ate, and yet the scientific data shows that people elicit different emotions before and after eating. We think more attention needs to be drawn to these environmental factors - when you eat, what time of day it is, what activity have you done directly before.

By analysing the trading history of your more experienced traders, you can help a trader identify specific environmental impacts to their trading. If you show a trader where they have either a positive or a negative edge, for example on a certain day or at a certain time, they perform particularly well as it signals to the trader to dig deeper and determine what was the cause of it. When there is a pattern of behaviour, there often is an environmental reason for this peak or trough.

For example, if we notice that a trader performs much worse on Mondays, we bring this to their attention, and they realise that they work from home on Mondays, and thus are less focused. We also bring to their attention that they perform best on Thursdays - and they realise on a Wednesday night that they always have an early night, waking up rested and refreshed on Thursdays. We highlight positive and negative edges, which allows traders to examine the environment around them, and identify a context that they didn’t think was important - like working from home. Not only can traders then avoid negative patterns, but by identifying the environment that is most conductive to doing well, it gives them the chance to replicate those settings in the future. By doing this, we are pushing traders into system 2 thinking - they must rationally think about their behaviour instead of acting on instinct and habit. By encouraging traders to think in system 2 every trading day, they eventually learn to always think slowly and rationally about their trading actions.

Performance Analytics

Performance Analytics delivers trading analytics and discipline tools for traders and is available for free to all clients who open accounts with our retail brands City Index and At its core is their intelligent behaviour engine which delivers personal insights for traders through simple visual charts and using nudges to encourage better behaviour.

This article was written by:
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StoneX Marketing Partners

StoneX serves more than 32,000 commercial, institutional & payments clients, and more than 330,000 active retail accounts.
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