Many remember the
name
GameStop from last year’s media storm when day traders manipulated the
market and pushed up prices of the distressed company GameStop using social
media and new generation no-cost trading applications.
اضافة اعلان
Financial advisors’ clients are aware that prudent
investing does not entail earning from individual stock trades. They are also
aware of day traders’ market manipulation tactics. So instead of short term,
they focus on utilizing the risk and return characteristics of several stock
and bond categories to construct a diversified portfolio that is fine-tuned to
correspond with their unique investment objectives, time period, and risk
tolerance.
Nonetheless, there has been a barrage of newfound
platforms and applications that seek to incite and encourage rapid investments
into highly complex derivative markets — something that even the most
professional
investors often study for years before being effectively
proficient at.
The following article will outline what such mobile
trading platforms do in order to get your hard-earned finances into their
accounts — and why you should avoid them like the plague.
Play silly games,
win sillier prizes
Unlike most conventional
self-directed online brokers, which advocate prudent investment, many of these
new applications urge beginners to quickly get in over their heads — and
underwater — by pushing users to make impulsive, uneducated, high-risk trading
decisions.
They then make use of the same compulsive tendencies
that got users glued to their cell phones. The apps employ many of the same
“bait-and-switch” strategies that gaming and gambling sites do to entice
players to spend, and lose, more of their money.
That is why they are most commonly referred to as
game-day trading applications.
Many of these
applications sign up new users and allow them begin trading within minutes.
Some do not need minimum account balances, and the majority do not charge fees
on stock trading. They do all they can to get consumers to start buying and
selling stocks, but they do not assist new investors in realizing the
consequences of ignorant investing.
The worst apps all have one thing in common: they
push you to trade frequently.
These applications are purposefully designed to
exploit addictive behavior. They are intended to increase dopamine production.
Dopamine, or the pleasure hormone, is released by
the brain when we consume great food, exercise, or engage in helpful,
interesting, or ego-boosting in-person or online activities. It is the chemical
that causes us to crave more.
Game-day trading applications trigger a dopamine
cycle, which takes advantage of users’ propensity to get-rich-quick schemes and
worries of losing out on “can’t-miss” opportunities. The more you trade, the
more you are enticed to trade and the number of trades, not the outcomes, is
what matters to these platforms.
Some of these applications utilize gateway
strategies to entice users to progress from stocks to trading options and
leveraged exchange-traded funds or
ETFs . Few investors understand how these
highly speculative instruments function — and how much they stand to lose if
they make poor trading decisions.
Most conventional online brokers use protections to
ensure that investors fully grasp the features and hazards of the assets before
granting access to them. However, some of the most popular game-trading
applications do not include such safeguards. And investors wind up losing much
more money without knowing why.
Another issue these organizations do not usually
explain is the short-term capital gains taxes that consumers may face if they
conduct a lot of day trading.
Brokerage companies that aim to persuade clients to
continually purchase and sell stocks are referred to as “boiler rooms” in the
financial business. Regulators frequently punish and attempt to shut down these
businesses. However, with every head cut off the snake’s body, another two
emerge.
Investing or gambling?
Smart investors recognize
that the aim of investing is to put their money to work in a way that coincides
with their unique short- and long-term financial goals. This generally entails
establishing separate funds for each purpose and dispersing them among a
targeted and diverse mix of stock and bond assets.
There have been multiple stories about young children who have become addicted to these application, which highlighted the importance
of financial
literacy education in schools.
The earlier students learn about how investing and
financial planning interact, the more likely they are to consider investment as
a tool for reaching financial stability rather than as a thrill-seeking hobby
similar to gambling.
The takeaway
No matter how hard they
sell, refrain from utilizing apps for day trading. The succulent marketing
ploys, at the end of the day, are just that — tactics to ensure that a
beautiful honeypot is set up to drain you of all of your hard-earned finances.
If you are serious about investing, look into
accredited investing platforms in Jordan, preferably ones that do not feature
hundreds of ads about becoming “financially independent” within days.
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