Day trading has become a mainstay of internet culture in recent years. You don’t have to go far to find forums full of trading advice and discussions, or videos across social media touting the financial freedom that day trading can bring. They’re not wrong, for experts it can bring financial freedom, but in some cases, it can be a slippery slope to debt and an addiction akin to gambling without any regulations or support to protect people.
What is Day Trading?
Day trading is when you buy and sell stocks and shares in very quick succession. Rather than holding onto the shares for months or years in the hopes of the price increasing over time, day traders buy shares in the hopes that the price fluctuation in the following seconds or minutes is enough to make them a profit. Day trading is very high pressure and involves watching the stock charts to look for an opening. It can take months of training to even grasp the basics of day trading, and for most people, it takes years to gain enough skill and practice for it to be a full-time job. Day trading is a risky practice and for most people, it can result in thousands of pounds of debt.
Can you get Addicted to Day Trading?
While day trading is seen as a potential career choice, it’s often much closer aligned to gambling. The issue is that, unlike gambling, there are no regulations to protect people from harm.
Like with anything that’s fast-paced and offers the potential to win large amounts of money, day trading can be addictive. There are numerous stories online of day traders getting addicted and losing thousands of pounds while trying to win back their money.
In an interview with NPR, day trader Matthew Jay spoke about the addiction that cost him $80,000. He said how he started out being successful; having turned a few thousand pounds into nearly $150,000. He then decided that he wanted to make money faster, lost it all and somewhere in that became addicted to chasing the rush of trading.
In the US, gambling helplines have been fielding calls from day traders. Several of these charities blame the game-like mobile trading apps for turning day trading into a kind of gambling. These mobile apps often have animations, bright colours, and reward prompts when you profit and generally bring more of a game-like feel to day trading.
Should Day Trading be regulated like Gambling?
Gambling hotlines have seen an increase in calls for support across both the UK and US. The number of people day trading has increased massively in recent years – according to Consumer Intelligence, a market research firm, 1.8 million adults started day trading online during the pandemic.
The truth is that gambling has changed over recent years & there are many new options that people are debating the regulation of and day trading is definitely on that list. The popularity of things such as Loot Boxes and microtransactions within games has led people to discuss the possible regulation of these and whether they should be forced to operate under a strict set of rules and regulations, in the same way online casinos and betting platforms do. Many commentators have suggested that Day Trading is no different to gambling, and should therefore be regulated in the same way casino sign up offers are in an attempt to protect vulnerable gamblers and those under age accessing platforms that they shouldn’t.
Day Trading Regulation
As day trading has become more popular, companies have attempted to cash in on the trend by “gamifying” day trading. In the past, you needed a special programme to day trade, and then basic apps were developed that took the same interface on the go. In 2022 there are many apps on the market that remove all of the daunting interfaces and replace them with interactive panels, pop-ups that encourage you to make more trades and animations that make trading more fun. Ultimately, these changes more closely align day trading apps with mobile gaming.
The nature of day trading is that investments are only held for a few minutes at a time, rather than being a well-thought-out long term investment. People liken this to being tipped off about a horse that is going to do well in a race and feel there is no financial skill needed to turn these quick investments into a win (or loss). It is this nature of the investment that has people believing that there should be some form of regulation, especially to protect those that may get pulled into the thrill of day trading without a real understanding of how much money they may lose.
Protecting Vulnerable Gamblers
You don’t have to look far online to find people talking about potential addiction to day trading, or studies considering that it’s an overlooked addiction, but nowhere for people to turn for support. There are many people that feel day trading should be treated in the same way, with the same level of protection and support on offer. The idea of day trading is a quick fix when it comes to investing and it is this instant nature of investments that people feel should be regulated, in a similar way to the spin of an online slot machine would be regulated if someone wanted to bet their money that way.
As day trading becomes more aligned with gambling, it’s clear that there needs to be some form of regulation to minimise the number of people that become addicted, as well as places for problem traders to access support. A ban on credit cards would likely be opposed because professional traders often borrow money to trade, but the bare minimum of self-exclusion controls and deposit limits should be introduced to provide some safety nets. In addition, the government might need to consider where and when these gamified trading apps should be allowed to advertise. Simply put, something needs to be done sooner rather than later.