In a Base rate fallacy, people prefer to disregard statistical and other commonly accepted facts in favour of merely fresh or recent information that they have been presented with. Consider these two examples – In one example, a Finfluencer, appears in front of a nice high-end luxury car and claims that everyone can make money and become wealthy through Futures & Options (F&O) trading. The second example is that, concrete facts show that 9 out of 10 market participants lose money in F&O trading. Why do most people overlook this data and engage in excessive F&O trading? The base rate fallacy illustrates this erroneous judgment we make. What we witness among influential people inspires us more than the ground reality.
Though showing videos of people having to sell their fancy cars or homes to compensate for F&O losses may help new entrants reconsider entering F&O, this is not the one that is happening in the marketplace currently. Scammers are just luring novice investors with these false hopes of money from F&O trading, which is just an illusion than anything else. But unfortunately, ‘9 out of 10’ traders losing money in F&O is now simply a statistic, and these scammers do not mention this statistic when they are falsely driving people to do F&O trading.
