If the usual trading problems place us in prison, there are two overarching problems that can place us in solitary confinement: trading addiction and traumatic stress. Trading addiction occurs when we become hooked by the ups and downs of profits and losses, much as a casino player can become hooked on gambling. Much of what we politely call overtrading is actually addictive trading. The need for the thrill leads us to place trades when our wise minds know that there is no objective edge present. I have seen traders so addicted to active trading that they have lost life (and family) savings.
Traumatic stress is familiar to us from accounts of people who come back from war or who undergo brutal attacks or physical/emotional abuse. Traumatic stress is different from normal anxiety that can show up in performance situations. The hallmark of traumatic stress is the loss of stability and security and the presence of highly stormy emotions, ranging from frustration and self-blame to fear and panic. It is not well recognized that failure to manage risk well can create massive losses--and painful trauma. Once traumatic stress occurs, subsequent trading ends up re-traumatizing the trader, leading to further losses and emotional damage.
If you read accounts of "trading psychology", you'll rarely encounter discussions of trading addiction or traumatic stress. There is a reason for this. The answer to both problems is to stop trading. Before there can be any possible constructive return to financial markets, the addicted or traumatized trader needs to cease trading and work on their addiction and trauma. If they ever can return to markets, it will be as very different people with very different strategies that provide them with control and consistency.
Who in the trading world finds a vested interest in telling traders to stop trading and take care of themselves? Not the vendors of "trading education" and trading seminars. Not the vendors of trading software and services. Not the proprietors of trading communities and trading firms. Not even trading coaches. Certainly not brokerage firms and publishers of trading materials. Everyone who sells to the trading public (and professional traders) needs those market participants to keep trading. There is no upside for them in telling people to back away from markets and heal their wounds, regain control of their lives, and escape the prisons created by their market involvement.
A while back I wrote an article on trading coaches as whores. Who in the coaching world will give a trader honest feedback that they lack the skills and talents to become a successful trader? We know from research that the vast, vast majority of people who pursue active trading will not be able to sustain an ongoing living from their efforts. But who is willing to acknowledge that? Who is willing to tell traders that active trading can ruin their lives, traumatize them, and leave them (and their families) scarred by addiction?
The trading coaches, trading educators, online gurus, trading communities, trading software vendors, brokerage houses, publishers, and so many more are actually selling the same product. They are in the business of selling hope. There is nothing wrong with hoping, but it's important to acknowledge the damage that can be done by pursuing false hopes. Successful trading can be a ticket to financial freedom, but many more traders may find in trading their own prisons.
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