Remarkably, integration of technology in the stock market has revolutionized the access of amateur investors to the market – anytime and anywhere. Besides, introduction of new virtual investment platforms such as cryptocurrencies, meme coins etc. has been attracting millions of first-time investors to this virtual financial market with huge investments. Precisely, there is greater accessibility never-seen-before to the markets. But at the same time it has proved a double-edged sword as stories of the people getting hurt faster are also emerging continuously.
In this sparkling online environment of investment matters, the appetite of youngsters, including a huge number of teenagers, has been growing exponentially. Most of these new-age investors with herd mentality are unaware about the huge risks loaded in their investments, especially when they invest in virtual financial markets through cryptocurrencies and meme coins.
With easy online access to investment opportunities available in the capital market and the virtual financial markets, the approach of local retail investors has been bullish where they have been parking their money in various stocks and other virtual financial products to make quick bucks through trading. Most of these gullible investors, who don’t want to miss the opportunity of making money, have actually turned these markets into the gambling den. The situation here at our place (J&K) is alarming as compulsive online traders are overwhelmingly young and are big risk-takers. They don’t even hesitate to trade heavily on margin (using money borrowed from their brokerage) and also take loans from banks to stay afloat in trading.
While discussing the dangers in online trading, I don’t mean everyone in the market is unfit to invest and make money in trading. Of course, many investors could fit that profile. Buying and selling of shares or investing in virtual financial products doesn’t necessarily mean an investor has a problem. One of the legitimate ways to carve out a living in the stock market is day trading, even if it’s inappropriate for most people. But it’s converted into a problem only when one is unable to stop himself from day trading even when he’s consistently losing his hard earned money.
There are certain tests which you as an investor can subject yourself to ascertain the type of investor or trader you are. If you are trading stocks online, no matter how much money you have lost, be sure you are a case of stock trading addiction. This addiction is similar to drug addiction, which can cause extensive damage to your health as well as wealth. Precisely, experts call this an illness.
Based on the continuous interaction with some of the best brains in investment matters, let me share their thoughtful observations so that you know yourself well as to what type of investor you are. In order to clear yourself as not a trading addict, you should ask yourself a few questions. Do you enjoy the challenge of trading even more than making money? Are you a big risk-taker? Are you willing to put large sums of money on a few stocks, depending on margins and on other credit lines for investing? Do you resort to bigger risks to erase your losses? Is it that the first thing you do when you get up and last thing before you go to sleep is check the position of your stocks? Do you bet large portions of your investment portfolio on a few stocks?
In the words of investment experts if your answer to these questions is affirmative, then you are a victim of online trading addiction.
I haven’t seen people talking about this kind of affliction, but the addicts suffering from uncontrollable online stock trading are no less serious than what ails the gambler who can’t stay away from gambling. While talking in the local context, I have seen online traders here who do nothing else but remain busy in trading stocks and their tendencies are of a compulsive gambler.
Meanwhile, we are witnessing a meme coin craze among retail investors who are fearlessly investing after top meme based cryptocurrencies, Dogecoin and Shiba Inu, witnessed massive rallies last week. However, a SQUID meme coin proved a fraud and stoked fears among the meme-coin investors. In a bizarre movement, the price of SQUID meme-coin, launched on October 26, rose over 23,000,000% in a week before falling to nothing on November 02, according to data from CoinMarketCap. It peaked at around $2,862 before falling to a fraction of a cent in a matter of minutes. Known as a rug-pull type of scam, the anonymous founders of the coin suddenly pulled out, taking about $3.4 million of investors’ money with them.
What is a meme coin?
A meme coin is a cryptocurrency product. It serves no real-world purpose right now and cannot be used as a medium of exchange at merchant establishments or in any other financial transaction. The purpose of most of these coins is to carve out a way to make quick bucks.
Dogecoin is said to be the original meme coin created in 2013. Remarkably, Elon Musk’s tweeting about it created enthusiasm among the retail investors and they started buying the coins in massive numbers. Since then developers have released a slew of meme coins, many of them spinoffs of Dogecoin. Today, according to the website CoinMarketCap, there are more than 5,000 meme coins in existence.
Today, some of these coins have gained popularity because influential celebrities have been talking about them in public. While retail investors are wooed to invest in these coins, they push up their prices by promoting them heavily online. To be precise, meme coins have no real utility at the moment.
Meanwhile, experts are of the opinion that rather than fundamentals, communities who believe in these meme tokens are fueling the rally. “There are no fundamentals driving the prices, as these are just community tokens. These are pump and dump coins, which don’t have any use cases,” they said.
What kind of risk meme coins carry?
Market experts who have a keen eye on the price movement of meme coins are continuously warning that it’s unlikely these coins will still be around in a few years or decades. Once investors move on to a new stock or cryptocurrency, meme coins will likely see their prices plummet. This type of investment is dubbed as very risky and is considered another form of gambling. Recent SQUID meme coin scam should serve as an eye opener for the investors. There are more chances that an investor will lose all or most of the money invested in meme coins.
Precisely, in the backdrop of expert opinions, retail investors shouldn’t don’t get these meme coins. Investment in these coins or tokens is highly volatile and speculative. Better is not to join the rat race and always invest in sound projects with strong fundamentals.
How can one deal with addictive trading?
First and foremost thing is to identify yourself as an online trading addict. Then the next step is harder, as you need to acknowledge that you need help for de-addiction. Don’t hesitate to seek help. However, it’s possible that once you identify yourself as a trading addict, you can help yourself in self-de-addiction process through will power. Further, stepping away from the stock market for some period and divorcing the market specific news as much as possible will strengthen effective dealing with addictive trading. One of my acquaintances who helped himself out of the addictive trading shared a useful tip. He says – “The next time you lose money in a trade, call it a day. Do something else and live to trade another day.”