Do you feel that you are Stock Trading Addict?

The best traders are the ones who have
controlled emotional responses. Professional
athletes have the same reaction —
 they use emotion to psych them up,
but they don’t let those emotions take them over.
Andrew Lo, M.I.T.


One of the best parts of the stock trading is that you need to exercise the brain and the will. It involves ongoing analysis and problem solving, and it requires the steady development of performance-based skills. The serious players of chess and poker enjoy similar benefits. Talk to any successful athlete and you'll find someone who has cultivated themselves, not just their bodies.

There are times, however, when trading becomes a vehicle for destroying mind and soul. You won't hear brokerage firms, trading publications, or seminar producers talking much about this problem, because their common aim is to keep the public trading and buying trading-related products. But, you should be well aware that trading becomes an addictive activity.

Trading coaches and psychologists will talk about losing "discipline", but rarely will they use the "A" word. Discipline you work on, addictions you get rid of. If you get rid of a trading addiction, there goes the trading coach. Many times, however, losses of discipline in the markets are related to addictive patterns of behavior.

An addiction occurs when an activity provides a strong source of stimulation that, over time, leads to psychological and sometimes physical dependence. We generally label a behavior as an addiction when people seek out the activity even in the face of demonstrable negative consequences. It is the inability to stop the activity when those consequences interfere with life that marks any addiction.
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Let's look at the facts:

* According to research cited by the National Council on Problem Gambling, 2 million adults (1% of the population) meet the diagnostic criteria for pathological gambling. Another 4-8 million adults (2-4% of the population) can be considered problem gamblers who are experiencing direct problems as a consequence of gambling.

* Research in psychology and psychiatry reported in the Oxford Textbook of Psychopathology finds that between 14 and 16 million Americans meet diagnostic criteria for alcohol abuse or dependence. Between 4 to 6 million Americans are dependent upon illegal drugs.

* Rates of substance abuse among men ages 18-44 are double those of the general population.

* A family history of addictive problems is one of the best predictors of risk for addiction. Peer influence is another significant risk factor.

* According to a research review in the Oxford Textbook, rates of depression are significantly higher among people with addictions than in the general population, with indications that people are using the addictive activities to medicate themselves for the pain of depression.

* Addictions are also most common among individuals with attention deficits and hyperactivity problems and appear to be related to sensation-seeking among those needing stimulation.

Even if we assume that traders do not have more frequent addictive behaviors than the general population, the statistics tell us that, in all likelihood, nearly one trader in every ten has a diagnosable addictive problem.



Day trading is a particular draw for those who are addicted to gambling through trading stocks. It provides the ups and downs very similar to the roll of the dice or the ringing of the slot machines and instant hits and misses. It can even be addictive for those who have never set foot in a casino. Of course this type of investing isn’t the only investing that is very much like gambling. Any high-risk investment is going to bear some similarities, especially those that offer high payouts to those who do succeed on occasion.

The problem is that that addictive gambling can be devastating to friends, family, and finances. If you suspect that you or someone you love has a gambling problem you need to either get help yourself or encourage them to get help.

If you have the personality that is easily addicted to things such as lottery tickets, slot machines, chocolate candy bars, etc. this doesn’t mean that you can’t ever trade on the stock market it just means that it might be a good idea to avoid some of the higher risk trading and stick with more slow and steady options such as mutual funds, CDs, and the like. Your rewards are likely to be better over time and you aren’t likely to experience the ups and downs that go along with activities that closely resemble gambling.
So what can we do about the issue?

The first step in dealing with any addictive pattern is identifying it, and identifying it as a real problem. Here are a few questions that you might ask yourself:

* Have there been times when I told myself to stop trading, but still found myself placing trades any way?

* Do I find myself overtrading by putting on positions with too large size or by trading during periods when nothing is happening?
* Am I trying to erase your losses by taking bigger risks?

* Have my trading losses created problems for me in my relationship(s), or have they caused financial problems for me?

* Have people close to me told me that I need to stop trading?

* Is the pain from losing more extreme than the satisfaction from winning?

* Do I find my moods fluctuating with my P/L?

* Do I trade simply out of boredom sometimes?

* Do I find myself preoccupied with trading outside of market hours at the cost of other work and relationships?

* Am I a big risk-taker, willing to gamble large sums of money on a few stocks?

* Am I frequently having unrealistic expectations about a stock's prospects for increasing in value and the general direction of the market?

Notice that, for many of these questions, you could substitute the word "drinking" or "gambling" for "trading". The dynamics of addictions are the same across the board. If you answered yes to three or more of these questions, I would suggest that trading has become a problem for you.

How does one deal with addictive trading? The first step is to identify it, but the second--and harder--step is to acknowledge that you need help for it. Its our pride that tells us we can handle it on our own through will power, but addictions wouldn't occur in the first place if will power were sufficient to prevent consequences.

Telling yourself you can manage your own addiction is itself a form of denial.

That is why a key step in Alcoholics Anonymous is acknowledging that you are powerless against alcohol. That is why AA substitutes mutual support for drinking and advocates abstinence as a goal.

Through books, self-help groups, and counseling, you learn to identify the thought and behavior patterns that drive your addictive behaviors. You also learn to identify cravings in advance and channel these in productive directions. Most of all, you regain a measure of control over your life and end the negative consequences of the addiction.

If you find yourself unable to control your trading and you find the emotional, financial, and social consequences mounting, that's not a passion for trading. It's an addiction.

Do the right things:

1) Close your account.
2) Get help.

Do it for you, your finances, and your loved ones.  Exchange addiction for control.  It'll be the best trade you ever made.


Sources and Additional information:

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