Are You Addicted To Trading?

In July of 2009, 64 year old Martin Hickman lost 200,000 British pounds (approximately $333,000) in a single day trading on the London Stock Exchange (the FTSE).

Hickman told The Telegraph (U.K), “I was going to be a househusband, take care of the dogs and do a little trading on the side. Then things escalated and I was hooked. I switch the computer on straightaway my alarm goes off at 6:30 AM and it stays on well until after midnight. I bore my wife silly, but she understands.”

Hickman’s story is only one of what appear to be never-ending examples of traders who continue to trade despite mounting losses. They manifest some kind of quasi-delusional confidence that they will hit what is called “The Big Fish Trade,” and win back everything they lost and more. They appear to be spellbound and mesmerized by the flickering ticks of their trading platforms, and are convinced that the “ten bagger” trade is just ahead if they keep watching, hoping and clicking.

Whether we admit it or not, many of us are lured into the world of  trading because of the potential to make big money.

There are instances when traders are just in it to win it, leaving them less focused on the process and solely on the profits. During these times, trading can have the potential to turn into an addiction, eventually damaging both the mind and soul.

To illustrate, let me tell you the story of a day trader who ended up wiping out his entire account for the third time in a row. Despite this, he insists on pursuing trading as he opens yet another trading account with fresh funds from a friend.

To make things worse, this day trader already has a family to support. No matter how much money he already lost in trading, he doesn’t take a step back to study the markets thoroughly or revise his trading plan. Instead, he dips into his family’s savings in order to get his hands on more money for another account.

Does he really have “passion” or is it merely an addiction? You see, an addiction for a certain activity occurs when a person becomes completely dependent on it. This behavior is typically shown by people who continuously seek out the activity no matter how much negative consequences it brings. What’s even worse is that people who are addicted can’t seem to stop the activity even though it’s starting to ruin their lives.

So how do you know if you’re already addicted to trading and not just passionate about it? Here are a few questions you should consider asking yourself:

• Do I often find myself still trading even after I have told myself to stop?
• Has trading created problems in my relationships with other people?
• Has trading caused me financial problems?
• Have I ever been told that I’m trading too much and that I should stop?
• Do I consider myself a big risk-taker, betting more than what I know I should on certain trades?
• Have I tried to erase my losses by increasing my positions?
• Are there times when I trade just because I’m bored?
• Do I feel the pain of losing more intense than feeling of satisfaction I get from winning?

If you’ve answered yes to all or most of the questions, take a deep breath and calm down. It’s not the end of the world. There are a few ways that you can get over your addiction to trading.

1. Take a break

Leave your trading desk for a while and treat yourself to a nice couple of days, a week, or a month  and go for vacation in some remote area where there is no internet connectivity  or  go out and play a sport, Whatever you do, just be sure to give yourself time away from the charts.

Just like an elite athlete, you need time to rest too. This will give your mind some time to recover from market stress and help you come back to trading refreshed and full of vigor.

2. Keep a journal

By having a trade journal which details all your ideas, thoughts, and actions, it will be easier for you to see if you have been trading too much.

3. Know your limit

Set a maximum trading loss. It may be anywhere between 1-3% per day. Just set a concrete percentage of your account as your limit. It will help you exercise control over your trading which is something that those who have an addiction do not have.

Remember, it is your top priority to preserve your capital so that you may live to trade another day.

I know that trading can become overwhelming sometimes. There are days when the market just seems irrational and you feel the need to conquer it. However, you must be careful. Trading should be an avenue for you to exercise discipline; not an instrument of self-destruction.