The gamification of trading is a rapidly expanding and dangerous development. While in the past, it has taken the form of demo trading competitions, most recently it can be seen in the surge in retail prop trading, where traders pay for an evaluation to receive a funded demo account with the opportunity to earn real cash. Proponents argue that games increase engagement and education, fostering creativity while curing boredom, but this mindset has no place in trading or finance. In reality, gamification fosters unhealthy trading patterns, increases risks, and can cause short-term market disruptions that may lead to counter-productive regulatory changes and higher trading fees.
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Core Gamification Elements
Gamified traders, platforms, and apps use the term “winning” when a trader makes money from a trade, while genuine traders understand the difference between winning and earning.
Here are the core elements of the gamification of trading:
- The gamification relies on inexperienced traders chasing immediate returns
- Usage of badges or points to trigger a dopamine rush (receiving a badge, or on-screen confetti to celebrate accomplishing a goal has been shown to increase trading activity by over 5%)
- Progress bars and leaderboards to push traders forward
- Animation, interactions, and avatars to personalize the experience
- Gamified educational content
Trading Gamification Examples
There are hundreds of trading gamification examples, and I will cover the three most common ones below.
Here are examples of the three primary types of trading gamification:
1. LiteFinance Demo Contest: Traders compete through demo accounts for cash prizes. The contests include leaderboards and achievements.
2. FTUK: A retail prop trading firm charging a one-time evaluation fee for potential access to a demo account that pays a cash profit share if traders meet conditions.
3. VantageFX: The VantageFX Rewards program grants redeemable V-Points for every trade.
The Gamification of Trading – Pros and Cons
Traders should consider the pros and cons of the gamification of trading before participating. Please note that my pros and cons are from a trader’s perspective. Brokers, companies, and trading apps reap countless benefits without any drawbacks.
The Pros of the Gamification of Trading
- Traders can earn cash rewards for demo wins without investing real capital
- Prop traders who can pass the challenge benefit from low entry requirements and high earning potential
The Cons of the Gamification of Trading
- Deprives participants of necessary trading experience, as no actual trading occurs
- Promotes unhealthy trading behavior, including excessive risk-taking and a gambling mentality
- Fosters unhealthy financial decisions with grave long-term ramifications
- Hinders long-term portfolio growth
- Creates the illusion of success in finance, without actual exposure to trading psychology
- May create an addiction to continued paying amid the hope of cashing out
- Places unnecessary pressure on traders to catch up or compete
- Lowers the drive towards in-depth education required to succeed as a trader
Future Trends in Gamification
The gamification of trading will accelerate its growth rate and adoption, and I have outlined likely trends.
The future trends in gamification may include:
- Usage of big data to create a personalized experience
- The implementation of AI to guide traders and create on-the-fly challenges
- The potential requirement to obtain gaming licenses before offering traders financial games
- Negative long-term financial development among traders
- The prevention of inexperienced traders from striving to gain an in-depth education
- A loss of potential traders amid frustration that they cannot play the game well enough
Bottom Line
Long term, the gamification of trading only benefits the brokers, companies, and apps, as they have massive earnings potential with zero risk. While they can “win” in the short term, gamified traders experience no long-term benefits but incur a high level of risk. They lose valuable education, time, and experience while adopting a false mentality, gambling habits, and lost income.
