A broker at the Tel Aviv Stock Exchange. Photo by Flash90.
The ups and downs of the stock market look random and chaotic when observed from the outside, but some brokers do make lots of money for themselves and their clients. Are they lucky, business gurus, or just good at risky business? A new Israeli company is working to give you and your portfolio the answer.
CPattern is a new cloud-based analytics technology that helps brokers and traders make better stock-market trading decisions in real time. It collects information on the buying and selling behavior of traders worldwide to analyze what works and what doesn’t. The multilingual solution is tailored to suit online brokers, who can then alert and advise home traders looking to invest wisely in the global stock market.
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“We are taking online brokers from the Stone Age to the 21st century,” says Oded Shefer, the CEO and co-founder of CPattern. “We give online brokers and home traders high-resolution data when they need it.”
Why share a technology to crack the stock market? Shefer tells ISRAEL21c: “We did not develop a machine that prints money. We analyze the decision-making and the activity of traders with relation to dynamic market conditions in real time.”
A secret weapon for every online broker?
While the technology can’t predict the future, he notes, it can help people engage in more responsible trades. Are you on a winning streak with six of your 10 companies, but a loser overall with the other four companies not performing well? If this is the case, one of Cpattern’s solutions can send you an alert about what’s happening to your portfolio as a wakeup call. On the other hand, it congratulates you when you’ve made a good trade.
“We can find systematic errors and systematic decision-making which is positive and which brings better results. This allows traders to improve their performance and online brokers to improve their retention and conversion rates,” says Shefer.
The solution is currently used by online brokers and marketing consultants such as Boston Technologies, AVA FX, youtrade FX, etoro, Leverate and a handful of others. The company is open for business.
Down the road, CPattern plans on developing solutions for traditional brokerage houses as well. If the price is right, the company can also help large firms detect any kind of illegal or suspicious trading behavior from within the firm. This could reduce public scandals and market manipulation.
“It’s a kind of sanity check,” Shefer explains. “Trading is very difficult and sometimes traders find it hard to come up with the right reason for their success or failure. Sometimes they say it’s the market or they blame themselves, or say it’s pure luck or random. We can give traders a sanity check to show them the hidden patterns of their own behavior.”
Founded in 2009, CPattern now seeks less than $5 million for continued business development. Based in the Tel Aviv area, the company employs five full-time staff, and works with a small team of experts and consultants to grow the technology.
Avoid trading hazards
The company links to readily available buy and sell data of traders worldwide. The system clocks behavior in real time without giving away the identity of the trader. No other company has been able to analyze in this way until now.
It wasn’t easy. “The market is very complex and it is influenced by many endless factors and variables; we measure a large list of variables for each particular trader and can make good profiles of his activity and understand what he does right and wrong in terms of profits and losses, and how he understands the market, and then we are mapping these differences,” Shefer says.
It took Shefer’s strong background in behavioral psychology to make the idea stick, since much of the stock market is based on fear-and-follow principles. This, matched with a mathematical co-founder, provided the winning formula for CPattern’s smart algorithms, which can be tweaked on demand by companies.
The solution can simply provide reports and records of other traders’ behavior, but it can also be tailored to help you build your own portfolio. The information is currently being sold to trade consultants to give to their clients. Special “premiere” information can be customized to online brokers to give to their home-trader clients – people who often operate in a bubble, sometimes playing the market with risky bets that put a lot at stake.
“We’ve made research on the effects: Traders who use it on a regular basis make more trades and stay longer in the trading process. We don’t know whether or not they are making more money, but they are trading more responsibly, and have given us very good ratings,” Shefer concludes.