Trading “for everyone”
There are more and more ads on social media for “trading for everyone”. Quick courses promising us that we will be able to earn money from the financial markets with short term trades by following simple rules that guarantee success.
There are people who tell us that they are professional traders with barely a few years of experience. In the industry, some people refer to these as “turbotraders”. Others who are more experienced and are sponsored by certain trading platforms are willing to reveal, just for us, their methods of laying golden eggs.
Illusion
The illusion of the industry makes us believe that there is a lot of money to be made on the markets and that people who are just like you are already making that money.
Of course, if you are not achieving those results, it is because you need that simple training they are promising and plenty of practice. Your perseverance (and your money) are the key to not giving up on getting that car or house you can see in the background of most of those videos that guarantee you financial freedom.
All these illusions go hand in hand with a boom in the popularity of those platforms that allow you access to this magical world of opportunities available with the financial markets.
You can choose from a wide range of assets and different markets, ETFs, CFDs, Cryptocurrencies… all with the commercial appeal of no commissions and with the professional support of being able to copy the investments of people just like you, except unlike you, they are successful.
It is an irresistible environment, building up an illusion that leads us to dip our toes in and try our luck. There are also celebrities promoting these platforms. What more can we ask for?
The bad news, and I don’t want to be a party pooper, is that this type of trading is for advanced and professional investors who are well experienced, well trained, and have the techniques, technology, time, and financial nous required.
Making money on the financial markets means that you are earning consistent money and are outperforming the market as well as outperforming professional asset managers.
These returns need to be measured with metrics, not the absolute rate of return, but rather the returns adjusted to the risk that you are assuming. A lot of effort can be put in trying to turn this illusion into a reality when (probably) by investing into an investment fund you will have better returns, with zero effort and with less risk. But of course “you can’t become a millionaire”.
Addiction
Once this illusion leads us to take action, why is it so hard to stop? That is where addiction comes into play when trading on the financial markets.
There are numerous psychological studies that show us the addiction caused by environments that constantly provide unexpected moments of reward followed by other unexpected moments of frustration. This is primarily what is behind gambling addiction.
There are also studies that show that when we find ourselves in those environments described above, where there are uncontrollable factors that can either lead to success or frustration, we tend to develop superstitious behaviour or look for strange and odd heuristics in order to try to establish a cause-effect relationship between the behaviour of a certain financial asset and a specific situation or past performance.
We are not going to go further into the dangerous effects of addiction, but I have had family members tell me about situations in which young people without any specific investment or financial education, nor any real experience, have given up everything to become “home traders”.
Specialists warn that addiction changes certain neurological structures, especially in relation to the prefrontal cortex, which affects the working memory, rationality in decision making, and the control of impulses. Addiction affects both a person and their behaviour: more impulsivity, aggression, emotional instability, irritability, a smaller attention span, and less concentration.
In the world of amateur trading we usually see that the worse things go the quicker the addiction increases, leading us to dangerous situations and putting our financial wellbeing at risk.
Lack of appropriate training for everyday users
Although part of the industry is interested in us using their platforms in a certain way, anybody has the right to enter into the exciting world of the financial markets and have a healthy interest in investing.
