I've covered the Itchy Finger Syndrome some time ago.
Now I want to cover why FX trading is a compulsive gambler's worst nightmare.
Let us simply compare online FX trading with going to the casino and playing the lottery with Singapore Pools.
24hr Access, Anytime, Anywhere
Online trading allows a gambler 24hr access, 5 days a week (Mon - Fri). As long as you have internet access, an online brokerage account, then you are all set to make FX bets anytime, and anywhere. FX brokers these days tout extremely sophisticated mobile software platforms that allow traders to fund their account using credit cards, monitor their trade activities, order and trade placements, technical analysis, and deliver high-speed live pricing, all on your simple handphone! The only respite is on the weekends when the markets are closed. This means that at any time the gambler has an irrational yearn to place a trade of get into the markets, they can do so with the simple click and swipe of a few buttons.
Comparatively, the casinos in Singapore are open 24hrs a day, 7 days a week, but the fact that the gambler is required to go to the physical location (MBS or RWS), means that access is not so easy. Keep in mind also that there is a SGD$100 entry levy deterring Singaporeans from entering. So some gamblers might get lazy at home, choosing to pass on going to the casino instead, thereby preventing themselves from irrational gambling decisions.
The national lottery with Singapore Pools current allows bets to be placed via its Singapore Pools physical outlets, or for premium gamblers, the offer of phone betting. Bets range from football, other sports, Toto, 4D and the Singapore Sweep. Gamblers usually also have to physically go to the outlets to place bets. Bet placing is also tedious with the need to shade little boxes of their bet entries. Singapore Pools also does not conduct the lottery draws every day. There are specific days for the lotteries like Toto and 4D to be conducted. Usually 3 times a week.
Ease Of Funding
While the most conventional way of funding any account is using wire transfer, many online FX brokers now offer credit card funding. This is the simple step of inputting your credit card number on your computer, key in the expiry and CVV number, and BOOM! Your funds are credited into your account almost immediately, allowing you to trade while you owe money to your bank. This is ingenius because the risk of default on the broker is actually passed on to the retail banks issuing the credit cards. This is also why the NFA in the US is trying hard to ban credit card deposits for retail traders, although it seems like a longshot that this can be passed into law in the near future. Some even smaller brokers allow funding via Paypal, Moneybookers and many other online wallet types. That's how easy to get money into your account for trading.
Comparatively, for both the casino and Singapore Pools, once a gambler runs out of money, they have to run to the nearest ATM to get more money. This is good because it limits the access a gambler has to funds. Of course the higher premium gambling segment offers credit lines as well and that is also very dangerous access to funds, but not many normal retail gamblers can get access to this credit line. Singapore Pools also accepts NETS payments, a debit card funds transfer of sorts. But none of these beats the credit card in terms of easy access and ease of funding to fuel their gambling yearns.
Leverage
This is probably the worst killer for many compulsive gamblers getting into the FX space. Leverage is basically a magnification of the nominal value of the underlying product. In the case of FX, the standard broker leverage is 100X nominal value. This means that a gambler only requires $1,000 to trade $100,000 worth of a currency pair! This means that any profits or losses are also magnified 100X! There is currently regulation in many developed markets, where leverage is restricted to 50X, but there are many FX brokers out there domiciled in eastern European countries which offer 500X or even 1000X leverage!
Comparatively, betting with the casino and the lottery is entirely 1:1. Only the higher premium gambling segment in the casino gets those credit lines i mentioned above, which gives about 10X leverage. That's absolutely nothing compared to the high leverage space in the FX world!
Investment Vs Gambling
FX trading offers gamblers the excuse that they are investing/speculating using rational decisions rather than pure gambling like in the casino. With the myriad of financial websites and blogs offering endless commentaries about views on different currencies, it is no wonder that many a gambler thinks of FX trading as rational speculation. This is a big mistake for many compulsive gamblers.
In the casino and Singapore Pools, most gamblers already know they are betting whether it is in standard betting games or betting on the outcomes of sporting or lottery events.
This is actually the worst of the lot because this is the standard mindfuck of many compulsive gamblers. The talk-to-yourself self rationalization that what you're doing is different from the gambler types going into casinos. Emotionally, there is self comfort and indiscipline to trade like a gambler thinking it is less bad than walking into a casino. It is actually far worse.
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In conclusion, anyone venturing towards the online FX space should be well aware of what they're doing and rationalize whether the trades they're making are gambling or not. It is easy to rationalize, but to not be emotionally affected by the movements in the markets and to maintain a high level of discipline is actually much harder to do than what many think.
BE SAFE
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