With the rise of the internet, and new online trading platforms emerging, access to get involved in stock trading is easier than ever before, with a quick sign up and login system, anyone who has access to the internet is now just a few clicks away from joining, taking barely 10 minutes.
What are the potential risks associated with the wonderful and convenient opportunity to make money?
Whilst advertising and information to access the online trading world is prevalent, with platforms such as Etoro, Trading 212 and Robinhood being well known, even by those who have no interest in trading, the available information on the associated risks and harm of these platforms seems to be significantly lacking in comparison, and a growing number of experts are worried about the phenomenon. In recent studies, a proportion of the individual investor population have been identified to show worrying symptoms, as mentioned in the ‘Journal of Banking & Finance’, ‘…individual investors in the financial markets displays symptoms of compulsive gambling, or an addiction to trading....’[1] The association between gambling, addiction and electronic stock markets has been further echoed in the ‘International Journal of Mental Health and Addictions’:
‘Addictions relating to online games of chance and gambling for money has boomed due to virtual casinos, electronic stock markets (day trading) and multi-player games on the internet.’[2]
Whilst gambling, addiction and online stock trading seems to present issues nothing new to the status quo, the connections between the three, along with the lack of information for the standard person, and the ease of access now available have very recently made evident the dangerous impacts of this new environment. A young man named Alex Kearns committed suicide after a period of time using the online trading market through the Robbin Hood platform. Kearns incorrectly believed that he had been subject to a significant loss of money, as reported in the Financial Times:
‘In a note left for his family, Kearns said he had ‘’no clue about what I was doing’’ and never intended to ‘’take this much risk’’… wrongly believing that he had racked up a loss of $730,165. In fact, his account had a balance of $16,000.’[3]
Whilst It may seem hard to refer to trading as anything simple, ‘…‘’ The parallels between video games and day trading are becoming closer and closer,’’ says Andrew Lo, a finance professor at Massachusetts Institute of Technology. ‘’…[4]’. With the new-found approach of the online trading platforms presenting ‘… free trading… cheap debt and the ability to buy small slices of stocks…’[5] the dangerous impacts of financial loss, and precarious gains can be hard to fully comprehend with such simple and easy ways to take action in the market.
‘There are 350 million problem gamblers displaying problematic patterns each year’[6], according to The World Health Organisation, of which has also noticed a merging of gaming and gambling culture:
‘ … there has been an increasing convergence between gaming and gambling on various platforms, significantly aided by the internet.’ This convergence may give rise to migration from games to gambling and co-occurrence of the two...’[7]
Although stock trading, gambling, and gaming has been part of many societies for hundreds of years, the blurring of the lines between the three is evidently giving way to a point of exploitation through the exposure of material that would have otherwise been confined to that of professionals. Furthermore, despite the growing association between gambling addiction and trading addiction, online trading platforms are currently only required to put forward warnings associated to investing and have the freedom to neglect the addictive alure they induce, as further mentioned from a report by Sky News.
[1] Cox, R. Kamolsareeratana A. and Kouwenberg. R. (2020). Compulsive gambling in the financial markets: Evidence from two investor surveys. Journal of Banking & Finance, 111(105709), p. 1. Available at: . [Access date: 5 March 2021]. . [Access date: 5 March 2021]. [2] Sauissa, AJ.(2011). Vulnerability and Gambling Addiction: Psychosocial Benchmarks and Avenues for Intervention. International Journal of Mental Health and Addiction, 9, p.19. Available at: Vulnerability and Gambling Addiction: Psychosocial Benchmarks and Avenues for Intervention | SpringerLink. [Access date: 5 March 2021].
[3] Wigglesworth, R. Henderson, R. and Platt, E. 2020, The lockdown death of a 20-year-old day trader, Financial Times, July 2020. Available at: The lockdown death of a 20-year-old day trader | Free to read | Financial Times (ft.com) [Access date: 5 March 2021].
[4] Wigglesworth, R. Henderson, R. and Platt, E. 2020, The lockdown death of a 20-year-old day trader, Financial Times, July 2020. Available at: The lockdown death of a 20-year-old day trader | Free to read | Financial Times (ft.com) [Access date: 5March 2021].
[5] Wigglesworth, R. Henderson, R. and Platt, E. 2020, The lockdown death of a 20-year-old day trader, Financial Times, July 2020. Available at: The lockdown death of a 20-year-old day trader | Free to read | Financial Times (ft.com) [Access date: 5March 2021].
[6] World Health Organisation, (2021), Addictive behaviours [Online]. Available at: Addictive behaviours (who.int). [Access date 5 March 2021].
[7] World Health Organisation, (2021), Addictive behaviours [Online]. Available at: Addictive behaviours (who.int). [Access date 5 March 2021].
[8] Addictions Counselling in Nottinghamn and online (2020), Andrew Harvey on Sky News talking about day trading addiction. Available at: Andrew Harvey on Sky News talking about day trading addiction. [Access date: 13 March 2021].
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