Recognize the Real Danger of Mobile Trading

Some blame the new tools of the trade. I say, don’t be one.

Photo by cottonbro from Pexels

Robin Hood — the noble thief from the 1300’s, who stole from the rich to give to the poor.

Adorning tight spandex pants and a feathered brim hat to match, his true bravery lay therein.

And with an outfit like that, one can only sense the real tragedy of his tale — he was just a few hundred years shy of stealing his fortune legitimately as another talentless member of The Village People.

Oh wait, we are not here to tell tales of this tight-legged nobleman!

No, we are talking about Robinhood Inc. — the commission-free stock trading company whose mobile app rose to mainstream prominence during the drawn-out boredom and despair of a global pandemic.

Robinhood is just one of the many simple, mobile-trading apps today that offer users the opportunity to buy and sell stocks, crypto and options very simply, conveniently and often at zero cost.

With slick interfaces and confident visuals, buying and selling in the world’s financial markets now takes little more than a few simple clicks.

Creating an instant feeling of opportunity and excitement, many eyes have been awakened to the endless, untapped potential that lies within the ever-changing world of finance.

And that’s clearly a good thing, right?

A New Era

Since its launch in 2015, Robinhood has never steered far from media headlines, especially as the limits of human psychology and vulnerability were being deeply tested.

Through months of social unrest, “cabin-fever” restrictions and people’s general feelings of uncertainty and helplessness, the era took a heavy toll on the world’s physical, mental and financial states.

People longed for a sense of hope. And for so many with nowhere to turn, Robinhood was ready to fill that void.

The company officially stated that “during the COVID-19 pandemic, we have seen an increasing interest in personal finance and investing, coupled with low interest rates and a positive market environment, especially in the U.S. equities markets, that has encouraged an unprecedented number of first-time, retail investors to become our customers and begin trading on our platform.” [1]

In May 2020, following the sudden onset of COVID-19, 3 million new accounts had already been created on Robinhood that year.

Of course, we can all use a mobile phone. But how much does a first-time, retail investor really understand about the complexities of trading and investing in the shark-infested waters of the world’s financial markets?

With phone always in hand and a temptation to make some fast money, new users are known to take aggressive and impatient action, chasing risky opportunities to try score a higher return.

Easily fooled by appearance, first-time traders are prone to jump on the back of high-growth stocks and past trends, with the expectation that they too can continue to reap this growth across the future.

But is there anything wrong with “Average Joe” taking a swing in the markets using simple apps like Robinhood?

Aren’t the financial market’s a game of risk and luck for everyone?

Desensitized

Let’s be honest — Robinhood is no seedy, online casino. And yet, many users have proven it to be highly addicting and encourage reckless behavior.

But how?

Robinhood is only a free, user-friendly app that offers unlimited access to a world of untapped money from the palm of your hand!

For some, the Robinhood experience can be more resembling of a mobile game than a financial tool. But with user’s real money and personal lives on the line, this is certainly no fun time-filler.

Through trading apps like Robinhood, we enter the competitive world of real finance, where false moves have literally cost lives. And unfortunately, there are no reloads around here.

A mobile user losing all their hard-earned Candy Coins is heartbreaking, but when real money is at stake, that’s when the game really gets serious.

With a lack of critical awareness, young and inexperienced users are nudged towards impulsive day trading with their stocks and crypto and can quickly develop risky habits that end up proving costly.

Whether intentional or not, any trading platform that can induce a sense of impulse, stimulate feelings of FOMO and encourage active engagement from users is not a financial tool — it’s a gambling device.

Market access is one thing, addiction is something else entirely.

But hold on, are the trading platforms really to blame for this?

Money Mobile

The underlying issues and criticisms that have plagued Robinhood may in fact have nothing to do with the app or company.

Rather, the problem may lie in the very nature of the phone itself and the effect it has on our instinctive thoughts and behavior patterns.

Many of us love our phones like a baby.

Yes, love.

We feel warm and happy every time we hold it. Our Hello Kitty phone case sparkles with glee, as our personalized screen fills us with an instant sense of confidence and control. This is our world.

We jump between apps in a subconscious state of impulse: engaging on social media, listening to our favorite music, all while absorbed in another dopamine-inducing stimulus. And how about doing a little stock trading on the side while we’re at it?

Trouble.

Our phone is conditioned to be a place of personal stimulation, comfort and pleasure, which naturally distracts and desensitizes us to the risks of buying stocks and crypto and the very real consequences that can come from any sudden errors in judgement.

For first-time users of these platforms, it can almost appear like we are looking down with a God’s-eye view into an abundant world of money. Feeling a sense of invincibility from behind a phone screen, blind optimism, over-confidence and a higher risk tolerance are common traits amongst mobile traders. [2]

It’s all too easy now to be suddenly reacting on impulse to feelings of opportunism and greed at one time, or desperation and weakness at another. Either way, approaching the markets on impulse has always been the preferred method for committing financial suicide.

Plus, now with instant access to debt at the touch of a button, these problems are only further magnified.

Emotions and impulse fuel stupidity. And in the historic words of Warren Buffett:

“When you mix stupidity with leverage, you tend to get some interesting results.” — Warren Buffett

From the ridiculous growth in hyped stocks and coins to the sudden jolting of old meme stocks like Blackberry and Nokia, “interesting” is certainly one way to describe some or the recent trends we’ve seen in the financial markets.

What’s Right is Wrong

Robinhood is clearly an amazing piece of technology. And, rather ironically, this may be the very issue.

The common criticism of mobile trading apps? They make it too easy to trade — nudging users to keep engaging in the markets simply because of the user-friendly nature of these platforms and the fact that trades can be made at no cost.

Robinhood’s free, easy and convenient trading service — this being the company’s entire objective and the very reason for its rampant popularity — are no reason for it to be misused by users and then be blamed for this very reason.

With a simple and fully accessible tool always on hand, this is certainly no open invitation to smoke a joint and then start dangerously playing around with your money like you’re back gambling on your Gameboy in the Pokémon casino!

And unlike these rigged gaming systems, the odds in the financial markets are far from being tipped the gambler’s way.

For all the services that Robinhood does offer users, unfortunately “babysitter” is not one of them.

Many first-time, retail investors are just starting to learn the hard way. And as the times keep changing, timeless lessons will continue to be taught.

Know You’re Enemy

At the end of the day, is Robinhood wrong for untangling the complexities and costs of the financial markets and creating such a simple, free trading solution for those with limited financial “acumen”? (No, that’s not an Indian spice).

Because of the high-stakes nature of market trading, the company seems to be endlessly walking on eggshells. From the colors used to indicate gains and losses to the way confetti has been used to celebrate a user’s first trade, every little detail of the app has been analyzed and scrutinized under the fine lens of human psychology.

But let’s be real, human psychology and trigger effects have always been at the heart of the financial markets.

Being self-aware and having the ability to understand, question and control your own basic desires and innate impulses has always been an essential part of smart investing — regardless of what tool is enabling your participation and actions in the markets.

If users really are so susceptible to the weakest, psychological nudges — colors, sounds and cheap confetti — unfortunately they were doomed to fail as investors from the beginning.

Phomo

“To be honest, I sometimes forget to check my stock account because of my schoolwork or when I’m playing with my friends” — Kwon Joon(12), mobile stock trader from Korea

Because of the desensitizing and distracting nature of phones, using a mobile app to move real money through the financial markets will always carry a higher degree of danger.

As tired, complacent users flip between Robinhood and their manic Twitter feed — while also trying to place a hungry Uber Eats order — their minds become a breeding ground for impulsive misjudgements and errors to be made.

Today, we all have direct access into the financial markets. And this access comes through a device that blurs the lines between investing, life and leisure — as well as the markets and the mainstream.

Accordingly, the “sexiest”, attention-seeking stocks and coins have never been more inducing to potential buyers.

Inexperienced buyers now face greater momentum shifts in the markets and greater potential risk from jumping on the back of crowd trends and online influences, leading them into getting badly burnt when market corrections and downturns hit.

Overall, users with phone in hand and a fixation on price lose sight of what it fundamentally takes to come out a winner in the end.

So what’s the simple remedy?

Call me a Grandad, but a phone is never a helpful tool for investing.

Why, old man?

Because, by it’s very nature, your phone is designed to keep you looking down, focusing on the “now” and channeling impulsive and impatient thoughts and actions.

“Investment app” is a contradiction in terms.

An app is a portable trigger that urges us to keep clicking and engaging in what’s going on — or otherwise, fight the feeling of “missing out” on the latest activity.

Of course, real investors know better.

Mobile trading apps can endlessly feed you with what’s happening now. But “now” is not where the investor make their money.

“Price is what you pay. Value is what you get” — Warren Buffett

Your phone can tell you the price to pay for a meme stock or coin every second of the day, but it will never tell you the actual value you are getting.

Regardless of what you are buying, sooner or later:

Price = Value. This is timeless market physics.

The lure to suddenly jump on big waves without being aware of how over-valued an asset may be is a sure way to ride the swell before eventually getting dumped on your head.

An asset’s market price is merely the tip of the iceberg, bobbing up and down on the surface.

That movement is not what the asset is.

A financial asset is not a price.

Play the Right Way

“The stock market is a system for moving money from the impatient to the patient” — Warren Buffett

Since the first stocks were traded in the 1600’s, the true nature of the financial markets has never changed.

Today’s technology is just a formality. Its purpose is to simply facilitate our financial actions and intentions with greater access and ease.

Modern apps like Robinhood don’t change the fundamental laws of the game, they simply help to nurture the timeless flaws in human nature.

As many of us know, market trading is where hopeful first-timers get hurt the most. For every winner in the short-term there must also be a loser, as no significant, real-world value can be created within the few minutes, hours or days it can take for a stock to suddenly jump or drop in price.

And, when it comes to buying the next crypto dud, was there any real-world value to begin with?

Price = Value is a fundamental law of market physics and no amount of Twitter hype, free trading or fake confetti can ever continue to defy this gravity.

Winning with Robinhood

In the simple words of George Soros — “good investing is boring”.

Whether we like it or not, less activity most often leads to greater results.

The biggest danger Robinhood users face is their thirst for action. And like most mobile platforms, trading apps feed that thirst with salty water.

Because of the very nature of phones, mobile apps are therefore never the ideal tools to make money in the long term and come away a winner.

The last thing you want is for your financial decisions to be getting mixed up with your casual phone use, passing feed and your changing emotions from one day to the next!

Furthermore, it’s also important to acknowledge the fact that most mobile trading platforms are young, start-up companies — not solid, financial institutions.

Unlike investing though the traditional channels, such as large, well-established banks and financial companies, young start-ups like Robinhood may not offer us the sense of stability and peace of mind we need to be investing for the long run — even if at a subconscious level.

This may only fuel our urge to approach the financial markets with a “get in, get out” mentality.

If you can’t imagine holding the majority of your wealth in an app for the next 5 or 10 years then you are going to be jumping at the daily news, thinking impulsive and impatient thoughts, and you will have no choice but to become a gambler with your money.

Never forget, your true objective in the markets is not to win today or tomorrow — it’s to come out a winner in the end.

Liked this post? Be sure to Follow and check out The Divine Dollar for a fresh perspective on money.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store