The long-standing popularity of the gaming industry has proven the love of video games amongst all ages. It is therefore unsurprising that the lines between gaming and other activities are beginning to blur, including the more ‘grown-up’ ones such as trading and investing.
The association between gaming and investing is actually far from new. It dates back to nearly a century ago, when John Maynard Keynes compares investing to the games of Old Maid and musical chairs.
According to Keynes’ The General Theory of Employment, Interest and Money (1936), the process of investing is almost no different from those games, in which investors play against one another.
Whilst the games are exciting and enjoyable, every player understands that some of them will lose when the music stops, and that the Old Maid is always circulating.
However, the gamification of trading in the last couple of years has given rise to a new generation of traders with a completely different mentality. But if you want to trade and invest seriously you’d better trade with a reliable broker, for instance Exness, or some others. Exness trading calculator is available for traders to help them identify all the risks and possible outcomes of their trade.
Thanks to the increasing popularity of trading apps, trading and investing have become more accessible than ever before.
Many of these apps gamify trading and allow newcomers to get involved in the financial markets with a limited budget and little knowledge of how to play the trading game.
Robinhood: The Pioneer in Gamifying Trading
Online discount brokerage Robinhood is a pioneer in the gamification of trading. Its commission-free trading app has made trading both fun and affordable with its low minimum deposit requirement and engaging features.
Robinhood customers can start trading with a minimum deposit of as little as $1. Boasting a colourful, simplistic interface, the trading app enables users to open a trade with a few tabs.
Traders used to be congratulated with a confetti animation whenever they placed a trade, a feature now scrapped after facing criticism from regulators and politicians.
To provide an even more entertaining trading experience, Robinhood offers traders who successfully refer a friend a chance to bag a share of an expensive, desirable stock, for instance, Apple Inc.
The top 100 stocks traded on Robinhood are also displayed on the trading app so that users can look for inspiration on what to trade.
The fun factor of trading on Robinhood, its affordability and the sense of community that the platform encourages lead to the rise of an entertainment ecosystem. Communities of Robinhood traders emerge on online forums and team up for meme stock-buying campaigns that challenge the norm in the industry.
A well-known example is the GameStop trading frenzy that took place in early 2021. The share price of the video game retailer was driven from no more than $20 in late 2020 to over $400 by the end of January 2021. The volatility created was so tremendous that multiple brokerages, including Robinhood itself, had to temporarily suspend trading in GameStop.
Problems of Gamification
Many in the trading industry have expressed concerns over the gamification of trading pioneered by Robinhood.
The Financial Industry Regulatory Authority (FINRA), an American-based industry-funded independent regulator, accused Robinhood of providing misleading information about trading with borrowed money. Together with a few other allegations, FINRA issued a $70 million fine to the brokerage.
Gamification is criticised for intending to deceive newcomers into treating trading as a game instead of a serious activity that involves rational financial decisions.
Since trading apps have made trading simple, inexpensive and entertaining, they encourage beginners to trade without a solid understanding of the financial markets. As a result, these inexperienced traders tend to display gambler-like behaviour triggered by irrationality, such as FOMO.
The apps have also made it easy for traders to forget about the financial risks that come with trading.
Benefits of Gamification
Despite the potential issues, gamification can bring about plenty of benefits to the trading industry.
Gamification is a great way to engage young traders, including millennials and Generation Z. Since these generations of youngsters are constantly distracted, it is often a challenge to draw their attention and convert them into customers.
However, gamification has successfully turned the financial markets into something that engages them and given them enough reasons to make the move to enter the markets.
Financial education is the missing piece in the phenomenon of gamification. Allowing beginners to gain sufficient knowledge and understanding about the rules of the trading game before they get started is the key to minimise the damage of emotional trading.
