Alex at UsableMarkets writes about Inspectd.com, which calls itself a “training tool for traders”. It’s basically a stock market game based on technical analysis. They show you a stock’s chart, minus its name, and you have to pick whether to buy or sell. Then they calculate your performance. Rinse and repeat.

Alex criticises the charts, which I agree are terrible. But I have a bigger problem with the entire concept. As far as I know, there is no evidence (from many studies) that technical analysis can outperform the market. In fact, once you take trading costs into account, it’s quite likely to underperform the market.

Yet, when playing Inspectd’s game, some people will have good performance simply due to luck. It’s just like roulette. Sometimes you get on a “winning streak”, which is not due to your skill, but simply by chance. Or, toss a coin many times and sometimes you’ll get runs of heads or tails. It’s just the nature of randomness, and you don’t have any control over it. However, Inspectd could give you some false impression that you actually have some talent at technical analysis. Your confidence boosted, you then go out and start playing with real money in the real stock market, and it ends in tears.

I think Inspectd needs to come with a health warning, like cigarettes.