Thursday, July 23, 2009

Trading Addiction: The Side of Trading That Few People Discuss

Thanks to an alert reader for passing along this article on the addictive aspect of trading.

I continue to believe that this is one of the most neglected topics in the trading literature. While it is common to talk of traders who "lack discipline", rarely is there acknowledgment that such out of control behavior is often indicative of addictive behavior.

Take the trader who loses money in a downward spiral through the day, without ever taking a break or exercising restraint. How is that different from someone who drinks themselves into a coma or who gambles away the family paycheck? The circular dynamics are identical: out of control behavior, unwanted and negative consequences, remorse and guilt, efforts at control, eventual relapse and loss of control.

The tell-tale sign of trading addiction is a trader who cannot refrain from trading--even when markets are objectively offering no opportunity. Even when losses are mounting.

Who benefits from helping traders identify and overcome addictive trading? Not the brokerage firms that harvest commissions; not the exchanges that take the fees; not the vendors who sell the trading tools and service; not the "coaches" who keep the addicted traders' hopes up. All are witting or unwitting enablers.

And the families of addicted traders? Their security is lost. Too often, if they raise concerns, they are chastised for not believing in the trader's "dream", for not being supportive of a gambling problem that masquerades as a professional undertaking.

My only hope is that traders who trade addictively can marshal the courage to look in the mirror and see what they're doing to their lives, their finances, and their loved ones.

Trading can be a wonderful, noble profession and a life-affirming challenge. It can also be pursued in a way that is highly destructive. Here are some articles that might help with self-assessment and that look in the mirror: