HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

The gamification of trading and the case for financial literacy


Trading apps are attracting younger audiences with new investment approaches and appetites, sparking knee-jerk reactions from regulators and media. Will these misunderstandings translate into opportunities for broader and more systematic financial education? In the last days of January this year, shares of a struggling video game retailer skyrocketed 400% in the New York Stock Exchange, and American authorities were forced to speak out on a case which spread panic across the financial sector, but also shed light on emerging trends.

In the months leading up to January 2021, large US investment funds had tried to make money by betting against the struggling firm in question, GameStop, listed on the New York Stock Exchange, also known as “short selling”.

But the plan fell short.

Thanks to support from investors and better-than-expected results, the price of GameStop shares rose. This support came from an online community of amateur traders who decided to take on Wall Street and large institutional investors, the “Goliaths”. In a well-coordinated move these “Davids” bought GameStop shares en masse and drove up the value of the company.

The buying surge spread to several other low performing stocks like AMC Entertainment, Blackberry, American Airlines or Nokia, obvious victims of changing times.

The crack of the whip

Under regulatory pressure, retail brokers were forced to limit trading in the shorted stocks and increased their margin requirements to push back the buying frenzy. Robinhood, a commission-free trading app and one of the protagonists in the saga, suffered a significant backlash for the restrictions, as its mission statement is “to democratize finance for all”.

The rise of free trading mobile apps and social investing

Robinhood has drawn criticism for gamifying investing. Critics describe an app that advertises zero-commissions or “free” trading and that looks more like a video game than an investment platform, where celebratory confetti was sprayed when you first signed up until it got banned. The company seemed to have leveraged gameplay principles and design in the financial services industry, with an apparent goal to make trading fun, rewarding and ultimately more addictive to an increasingly younger audience.

The attractiveness of features like social trading, slick interfaces and colourful graphics resonates with young first-time traders. Citing a survey conducted in December 2020, Robinhood claims a younger and more ethnically diverse customer base than incumbent brokers, with Gen Zs making up 70% of its customers.

They make investment decisions with the help of advice found on social media, that is TikTok videos under the hashtag #robinhoodstocks or forums of like Reddit’s WallStreetBets, where social sentiment rather than company performance is the driver of a stock price. These platforms have been around for a while, but the pandemic brought ripe conditions for this market to thrive; stimulus checks, free time, boredom. Many newbies decided to start investing as a hobby or after seeing how much wins GameStop traders cashed in.

The good

It could be a strategic mistake to dismiss younger investors. Treating them as unserious and reserving investment for older and wealthier audiences can be a missed opportunity to educate. In an Ernst & Young paper on the subject, Global Wealth & Asset Management Leader Mike Lee talks of cross-industry convergence, where “wealth and asset management firms […] are betting that gaming techniques will help them to create enjoyable, empowering moments — and habits for their clients. Ultimately, these firms believe that gamification will revolutionize client experiences and relationships, leading to improved investor loyalty and better investment outcomes.”

He explains that making complexity simple is a great way to explain concepts like risk and reward, and that “It has the potential to create a virtuous circle of engagement, learning, trust and loyalty.” CNBC’s Julia Boorstin qualifies Robinhood as an example of how “technology can turn an industry with gatekeepers into a more open platform and force the established giants to innovate and expand.”

Gen-Zs are digital natives and see stock trading as an extension of their digital lifestyles. This means that their interaction with trading apps and platforms goes beyond the realms of financial services as they possess the skills and mindset to have tools like social media or crowdsourcing intersect with investment in a way that no traditional broker could have imagined nor anticipated.

The ugly

Albeit full of promise, this phenomenon showed it needs to be harnessed in some way. A survey by the UK regulator FCA found that these younger investors are underestimating the risks of investing and 40% do not see losing money as one. User friendly trading apps are also seen as the reflection of thrill-seeking gambling, a short-sighted frenzy for impulsive traders who probably aren’t able to handle losses.

The business case for financial literacy

This year might have unveiled opportunities for financial education, a chance to embed education within brokers’ offering with free educational tools or personalised webinars in a more engaging and rewarding way. Gamifying learning is a known approach for optimising results. In the financial services sector, increasing financial literacy could involve free material explaining concepts like liquidity, management, inflation, diversification in fun and engaging ways with more innovative graphic design or virtual reality.

Online brokers should recognize the need for a fresher approach. Disclaimers are not enough, there is a real opportunity to create value throughout the financial service lifecycle, from onboarding to cashing out.

Today’s traders must be empowered to have optimal control of their financial decisions and a sound understanding of the risks and find the necessary help or resources before any problem arises. Educated traders means dedicated traders who build trust in your brand and help retail trading grow sustainably.

#source


RELATED

Choosing a trading instrument: how to trade currency pairs

Early on the path to becoming a trader, every beginner must determine what to trade and how. This choice should be made based on the desired goals...

What is crypto mining?

Cryptocurrency mining has brought about a new gold rush where individuals and businesses are deploying mining hardware to earn as much cryptocurrency as possible as so-called miners...

Online vs. Offline Trading: Weighing the Pros and Cons

In today's digital age, trading options have expanded beyond traditional methods. With nearly universal access to the Internet, online trading has surged in popularity...

What is Forex and how to trade on it?

The term Forex - also known as foreign currency trading, currency exchange or by its acronym FX - refers to Foreign Exchange or to transactions between currencies...

How to Trade the Fed Rate Decision - Guide for 2022

The Fed funds rate is one of the most important benchmarks for investors and traders all over the world. Its adjustment significantly affects exchange rates and the economic situation of countries...

Ultimate guide to trading Polkadot for beginners

Blockchains and the innovations they offer largely existed as isolated entities in the crypto space, unable to share value or communicate with each other...

Common Trading Mistakes and How to Avoid Them

Have you ever wondered what helped all those professionals of Wall Street become successful? You will be surprised, but the key to their reached heights is hidden in their mistakes...

Guide To Choosing A Broker In 2023

Choosing a reliable broker is an important step in the career of a successful trader. It is the broker, being the intermediary between you and the market...

Exciting Benefits of Trading Forex

Forex trading is the exchange of one currency for another to generate profits. If you’re reading this, you probably know that and are now looking to choose between the existing options like stock...

Top6 Benefits of Forex Trading

Forex trading, also referred to as foreign exchange, is the process of exchanging currencies to potentially make a profit, usually for trading purposes...

Volatility: What It Is and Why You Should Know About It

Everyone who has ever dealt with trading has come across such a thing as volatility. It is easy to guess that this concept is important, since it is talked about, discussed in textbooks and various articles...

Forex: perfect source of first income for the youth

In today’s fast-paced digital world, young people seek new avenues to earn income and gain financial independence. Among the options available, Forex trading stands...

High-Frequency Trading (HFT) - Overview, Advantages, Risks

Everyone who is interested in financial markets, of course, knows about the existence of different trading methods. Some of them are quite popular, while not much is known about others...

Which Is the Best Forex Trading Course?

The world of markets and online trading has a number of particularities. Learning is a blessing. Knowledge is your driving force. Your personal improvement on an ongoing basis is an objective that ultimately aims to succeed in critical situations...

Earnings Season - Meaning, How To Make Its Best Use?

Traditionally, the earning season is a favorite time of year for active traders. This is a time when the potential for making profits increases many times over...

How to Calculate Forex Spread

In CFD Trading, the spread is the difference between the "bid" and "ask" price of an asset. In the Forex market, the spread is measured in PIPS. When trading...

What Are Meme Coins?

The cryptocurrency community has a ceaseless admiration for memes and pop culture. From its inception, meme coins have seen exponential growth in the crypto space...

How to trade Forex: fundamental insights

The world of trading is diverse. There is a multitude of assets for investments: you can start trading commodities and try your chances with CFDs, or you can...

Master the Art of FX and FX Indices Trading with FXTM’s Expertise

Embark on a journey through the dynamic world of FX and FX indices trading with FXTM, a global broker that's recognized for its trustworthiness and expert service. We provide traders with the opportunity...

How to become a Forex trader

While Forex is an exciting and lucrative financial market, many traders face difficulties when trying to make steady profits and grow...

FP Markets information and reviews
FP Markets
81%
RoboForex information and reviews
RoboForex
77%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.