Gamification of trading, a risky game for neo-traders

Place your bets, no more bets. This famous croupier formula is adapted to the new financial practices of young people who are more and more likely to try out trading platforms for better or for worse. The mirage of easy and quick wins, the fun aspect and the accessibility of the platforms encourage young people to take a very close interest in the financial markets. The health crisis reinforced the trend following the spectacular rebound of the financial markets and cryptocurrencies. The casino effect is real, the many disappointments.

Digitalization induces risky behaviors

Targeted ads and influencers offer increased visibility to platforms with the promise of high earnings in just a few clicks. Trading platforms give the possibility of placing orders from your smartphone with reduced fees. The offers are flourishing on the net, therefore attracting the attention of the stock market policeman. The AMF regularly publishes warnings about unauthorized players who offer to invest in Forex and other financial products without authorisation, sometimes with significant leverage effects.

The lure of profit seems to be the main motivation of young stockbrokers. Unfamiliar with the mechanisms of the financial markets, self-proclaimed traders invest substantial sums without respecting the prudential rules of investors, namely gradually building a diversified portfolio both in terms of stocks and geographical sectors with a long-term investment horizon. The search for a good move leads savers to adopt a behavior that is more speculative than a heritage strategy. For good reason, platform users tend to have an approach approaching gaming or even sports betting. Thus, only chance would be the source of the gains made with the risk of going into debt and developing a form of addiction.

As early as 2014, the AMF warned in a study that 9 out of 10 stockbrokers saw losses through trading platforms. Since the health crisis, the same authority has counted a million additional stockbrokers. To help investors limit risk-taking, some platforms offer their users the option of replicating an investment strategy that has proven itself in the past. The idea of ​​the “copy cat” is interesting for neophyte investors who become familiar with the financial mechanisms. But the adage “past performance is not indicative of future performance” must remain in the minds of stockbrokers before making the decision to invest in a security or a financial product.

Activism 2.0

The stockbrokers organize themselves to communicate good tips on social networks. Twitter, but especially Reddit bring together groups of investors who exchange and coordinate their investments. These communities, which in certain respects resemble investment clubs, bring together thousands and sometimes tens of thousands of investors. These small holders can have a considerable impact on the proper functioning of the financial markets. In this, the WallStreetBets group is representative of a form of activism capable of bend major financial players by coordinating the massive purchase of small values ​​on the markets.

This group of stockbrokers succeeded in increasing the valuation of the American company GameStop, in the grip of serious financial difficulties, from 200 million to 10 billion dollars in a few weeks. As a result, an American hedge fund suffered considerable losses by betting low on this stock. Some see it as a way to fight against the financial and more broadly capitalist system, while others denounce a form of market manipulation. Regulators are interested in this new form of investor collusion. To date, no measures have yet been taken to regulate this marginal but highly symbolic phenomenon.