The only valuable thing I learned in the Stock Market

Published by Nighten on

During the first lockdown, while seeing it falling into pieces, I got really interest in how our economy, and by extension the stock market, is working.
To be clear, in case you're worrying, I've never put any money into any stocks or financial assets: I was just really interested, and wondering if that could be something for me. So I read articles, watched lectures and studied books on the subject. I learned a ton of really interesting stuff and don't regret any of it.

And ultimately, all this new knowledge led me to the conclusion that no, I'm not gonna touch this shit.

I'm quite proud of myself for making this decision. But that's not what I want to talk about today. I want to talk to you about a specific lesson I learned that I think you should know about; and it has implication way beyond lines going up or down.

Welcome to the Jungle

The finance industry has a ton of beast-related vocabulary. Bear, Wolf, Bull, Shark... All of these correspond to a specific archetype or movement in the market. This culture and mythology is built on a central idea: Everyone is here to make money at the expense of the Sheep (another archetype).

When looking at a complex structure such as an industry or market, it's always useful to see it as a combination of systems and incentives. And the more you look into it, the more you realize that the market system is hostile by design. All is made for the odds to be against you.

For you to trade you need a broker, someone who is the intermediate between you and the market. The way they generally make money is by taking a small cut of your profits, but also every time you buy or sell anything. This mean that their best interest is that more people make more trade more often, not really that the people actually make money. And for you, the individual trader, it means that you're loosing by default: every time you take a position in the market, you're at a slight loss due to the fees.

Frequently, new "product" or mechanism appear, promising high gains, but with difficult to understand rules. Leverage for example is a way to multiply your profit, but also your loss. Some brokers make you trade derivative like CFD, making it possible to trade even when the market is closed, but also give the broker more freedom to manipulate markets. And lets not talk about Options, Binary Option and other weird contracts that seems simple in appearance, but just because you didn't fully grasped the implication yet.

Everyone is here to make money at the expense of the Sheep (and that sheep is probably you).

Lesson learned from this cruel world

I really just scratched the surface of all the tricks in place to fool the wannabe day-trader. But you're probably wondering: Why is this kind of stuff legal? The thing is, it is probably not legal anymore, or will not be in the future.

In each countries, government and regulation step in so that the free market stop bullying the little kids.

A while ago a Leverage of x100 or x500 was possible to find, but today most brokers (at least the serious one) are limited to how much they can offer. CFD are completely banned in some countries (not mine tho :( ). And I'm not sure how Binary Option was even legal in the first place.

But all regulation, without exception, came after the damage was done.

Lives has been destroyed by exploited inexperience and gullibility, sometime literally. Even the most obvious scams can roam free for month (or years) before institution put an end to it.

What I want you to remember in this journey into the financial jungle, is that you should not rely solely on regulation for your own safety. Like you, I'm very glad they exist, but when a new threat arise they are inherently slow to respond. The damage caused to the individuals needs to be visible and acknowledged before any action is made.

If you see something in your life that can be a potential threat for what is important to you, you have to build guard fences around it, or avoid it completely.

Whether it's the stock market, advertising, free to play games, substances, or yourself. Don't wait for an institution, or anyone, to police them for you.