subject: Etoro's Openbook - A Useful Forex Trading Tool? [print this page] Etoro's recently released OpenBook Beta version is at the very least a good way to spend half an hour observing how retail traders are betting on the currency markets, but is it really a useful tool?
Before assessing the tool, for anyone who hasn't used it we'll look at what it actually does. Before that though, it's description as a tool may be commented on, as it is not what people think of when the term tool is used. It can be used as a tool, and for the moment we will stick with that term and get on with the issue in hand instead of getting into semantics.
OpenBook is a free resource, although to use it's full features, you need to have an Etoro account. It is in simple terms a live feed of all OpenBook members' trades, and unless the market gets overloaded, it occurs in realtime.
You can select to view all trading transactions, or just the top 100 traders. You will see exactly who is trading on what currency or commodity, at what price they open a trade or order, and whether it's a buy or sell trade. You will also see trades they are closed, and whether or not a profit or loss was made. Profit is expressed as a percentage, but loss percentages are not shown.
You can copy trades, and you can select a trader(s) to follow. If you decide to follow traders, they will appear in a separate feed, which cuts down on all the 'chaff' coming through. So, how does this help a trader?
As OpenBook is so new, it is going to take a bit of time to assess whether or not it will be of benefit to experienced traders, so for the moment, we are going to look at how it may be of use to the newer trader.
One of the things it does for the beginner is give them an invaluable insight into the way people appear to respond to fluctuations in pair prices. If for example a beginner is following the EUR/USD, then on the EUR/USD page they can actually observe traders closing trades as a pairs swing. Problem: you cannot see whether the trade has been closed manually or by stop loss/take profit. You can look at traders trading profile, but as the trades are not obviously linked to their closures, you cannot be sure when the trades were actually opened.
Perhaps the most useful aspect of all this is that it facilitates thought, and a certain degree of critical thinking. If Fibonacci or one of the other myriad methods were a guarantee, then traders would not need to develop any sort of intuition. Of course there is more to it than intuition, and basic forex concepts such as points of resistance and support need to be taken on board.
The feeds almost give the beginner an insight into how traders 'move' with the market - although as we can't explicitly see whether or not they are scalping, we can't see 'why' they are doing it. Are their deals closed due to a well informed stop loss/take profit, or are they screen-watching? You can sometimes identify the odd scalper by looking at a profile, going to the trader's 'stats' page, and looking at their 'average trade time'.
This 'tool' will not tell a learner how the markets move. It will however, with a bit of investigation, potentially show them how traders move. If you are going to use this tool as a learning resource, there are several parameters to consider though. You need to have an analytical mind and make sure that you leave no stone unturned in the traders' profiles and stats.
Do your homework; if a trader has 88% profitable trades, yet their performance graph shows below zero, and conversely a trader with 66% profitable trades, has an average 25% performance, why is that? You need to be very thorough, and ensure that you understand what all the percentages mean, and more importantly what they don't mean.
As a 'tool', the very least that OpenBook does, is to get new traders to think critically. What it does is provide 'facts', and from there it is up to the new trader to make sense of all these facts, and from there decide what to do with them. And, finally, before deciding on a plan of action, run it by someone, because tools are great, but nothing beats experience.
