Wednesday, November 01, 2006

Dr. Brett's Heartfelt Plea: When Trading Gets Out of Control

What I love most about trading is that it exercises the brain and the will. It involves ongoing analysis and problem solving, and it requires the steady development of performance-based skills. I'm sure 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, as someone who has worked with many independent traders and traders at firms, I've seen this problem far too often: trading becomes an addictive activity.

Oh yes, 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, a person becomes psychologically and sometimes physically dependent upon. 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.

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 4-6 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.

For the trader with attention deficits who cannot tolerate boredom or lack of stimulation, trading provides action.

For the trader who is depressed, trading can provide an escape from the self and a sense of immediate gratification.

Such traders need to trade and keep trading when they have no edge whatsoever.

They lose their money, generate failure experiences for themselves, and create hardships for their families.

For them, it's not about "discipline" and following trading rules. It's about getting their lives back. And getting the right kind of help. If you see any aspect of yourself in this portrait, do the right thing. For you, and also for those who love you. Trading should expand your control and self-mastery, not become an instrument for its destruction.

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