My recent post on out-of-control trading brought many email inquiries and insightful comments on the blog. One of the common questions voiced was: How can you tell when a trader is passionate about trading vs. addicted to it?
The first step in dealing with any addictive pattern is identifying it--and identifying it as a 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?
* 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?
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. It's 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.
I do not provide private counseling myself, but will be happy to assist with a referral in your region. If these posts help just one person turn his or her life around, that will be one of the best returns on investment I've ever achieved.
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6 comments:
Hi Brett
Your post on addictive trading is timely. As a novice, I find it is almost compulsive to trade every day, even outside pit session for SP futures. Going over my journals on these trades, I have realized it does not improve my expectancy ratio to devote so much time to placing many trades, especially outside pit session, at the expense of my other social activities.
I have printed out your post to remind me not to become addictive to trading, to save me from having 'cold turkey' treatment.
Perhaps, it is time to take a break and go away.
Hi Yin,
That's a great point. It's worth going over your results and figuring out which times of day and types of trades are giving you the majority of your profits. Then just focus on those. You'll save time, effort, frustration-- and commissions!
Brett
Great article as usual.
I answered yes to 2 of the 8 questions. I have two comments,
1. What if you replaced the word 'trading' with 'pro golfing' instead of with 'alcohol', does it still sound the same? It strikes me that trading has a certain bad reputation which is linked in people's minds to negative activities and emotions such as gambling and greed. So What's considered addiction with trading may be called unrelenting determination and drive in pro golfing or Olympic sports.
2. I also think that a certain level of addiction is necessary in order to train (market research) and compete (trade) at the highest levels of performance in any given field.
Looking back, a mild addiction or obsession has helped me in several areas achieve goals which otherwise I think I would not have been able to achieve. In those instances rationality and complete control were temporarily suspended as I 'lost' myself in an activity over a certain period of time.
What do you think? Does the above make any sense or is it just denial? :)
Eyal
Hi Eyal,
You're asking great questions. I do think the absorbtion of a committed athlete or trader is different from addiction. In the first case, the drive is directed and controlled: it aims toward a goal. It is done out of desire, not the need of filling a void. Addictions are not directed and controlled and they don't aim toward a goal. I think there's a huge difference between the trader studying the market, studying his/her performance, and using the information to improve the next day and the trader who does none of those things and can't stop trading the next day even after going through a max loss level.
Control and consequences: those are two of the distinguishing features. Thanks for the opportunity to clarify.
Brett
I have a blog
Trading Addiction
http://tradingaddiction.blogspot.com/
That very ironic
Dear Brett, G'day
Once again awesome post. Thank you for sharing.
And very good explaination (to Eyal) below. On other words, could we say, one is chasing the 'dream' and another one is chased by the 'nightmare' (emptiness)?? Is it appropriate?
Yes, you are changing not one traders' life, but in 1000s. God Bless you and your family.
Be Awesome,
Raj
>>>
Hi Eyal,
You're asking great questions. I do think the absorbtion of a committed athlete or trader is different from addiction. In the first case, the drive is directed and controlled: it aims toward a goal. It is done out of desire, not the need of filling a void. Addictions are not directed and controlled and they don't aim toward a goal. I think there's a huge difference between the trader studying the market, studying his/her performance, and using the information to improve the next day and the trader who does none of those things and can't stop trading the next day even after going through a max loss level.
Control and consequences: those are two of the distinguishing features. Thanks for the opportunity to clarify.
Brett
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