Online Trading Academy President Talks About the SEC, Cryptocurrency, Overconfidence and more

Over the last few weeks, here are a few things which caught my attention in the news and out of the OTA Research Center

Firstly, I’ve been keeping tabs on what the new Chairman of the SEC, Gary Gensler has been saying about everything Retail Trading and Investing.  Over the last few weeks, he testified at the Government hearings about the GameStop Short Squeeze saga and last week he spoke at a FINRA conference touching upon Crypto Currency, Cyber Security and FinTech.  All adding up to him reinforcing that investor protection is a top priority, especially with regard to Crypto and recommending that congress regulate Crypto exchanges.  As one of the most trusted names in educating retail traders and investors, I am excited to announce that we in Online Trading Academy are investing in a new combination of courses, tools and resources for our Cryptocurrency asset class, which we are looking forward to progressively sharing with you.

Secondly, in the news stream about retail trading and investing, one thing which caught my attention was a great article from Entrepreneur Magazine entitled, “Are You Dangerously Overconfident?”.   Oriented towards entrepreneurs in business, but touching upon the influx of new retail traders and investors coming into the financial markets via trading apps during the COVID period, the author rings the alarm bell about what is called the Dunning-Kruger Effect.  This is the groundbreaking research published in 1999 by psychologists David Dunning and Justin Kruger entitled, “Unskilled and Unaware of It: How Difficulties in Recognizing One's Own Incompetence Lead to Inflated Self-Assessments”.  In their research, they demonstrated the tendency of people to assume they are more skilled than they actually are.  In particular, the author cautions entrepreneurs not to take on new challenges they don’t have the skillset for without getting the specialist knowledge needed.  Namely retail trading and investing.  Because hyped rising markets are a hot-bed for the Dunning-Kruger Effect of being dangerously over confident.  Especially with super-hyped new things like Crypto Currency like I mentioned Chairman Gensler of the SEC was commenting on earlier.  The key for Crypto and Retail Trading and Investing more generally, is to get educated, to learn the specialist knowledge, build the skills, evolve proficiency and develop confidence, to not end up on the wrong side of the Dunning-Kruger Effect!  Visit the OTA Research Center to find out more.   

Thirdly, that ties in with a snap-survey we also published out of the OTA Research Center, about using Smart Phones apps for trading and investing.  We wanted to investigate – are they a source of over confidence or are they up to the task for educated traders and investors, at least as mobile extension of a laptop and desktop approach?  We got some interesting results.  When we polled the twitter universe, 102 people responded and the results were pretty much what we expected.  Roughly 80/20 with 20% saying they always use a smartphone app and 80% saying they sometimes do and never they never do, pretty much evenly split 40%/40% between sometimes and never.    Interesting.  We were expecting some portion of people to say never and were surprised it wasn’t higher and that so many people said sometimes.  So when we did the comparison survey with our students, we added an open ended question of “why or why not?” to delve into that more.  145 students responded and we were surprised that the percentage of advocates for using smart phones all the time was higher at 40% and seems to have come from the “not a chance” camp which was below 20%. But when we looked at the responses to the open-ended  questions we gained some more insights.  The balance of sentiment seems to be that of course multi-screen desktops, laptops, tablets and smart phones are all a complement to each other suited to different purposes in the flow of an students’ trading and investing activity.  Some example comments from students which speak to that are:

  • Trading in a hurry is not in my trading plan.
  • I don’t want to mark up charts on a mobile device. But I do want ability to view markings I’ve made via [my] PC [on my mobile device].
  • I like having the flexibility to at least get a quick look at a chart when I am out of the house.
  • I prefer mobile apps to check on trades, modify a position once I'm in a trade [but they are] not an ideal way to analyze a potential [trade] setup.
  • [They are] good for doing a quick check on where the price is in relation to the structure, trend and zone; but not for deep analysis as usability is limited compared to a PC.

Those are just a few of the comments which seem to be a balance of the sentiment.  We will be researching this more with further snap surveys to try to resolve and surface further insights.  Find out more at the OTA Research Center.