Do you think trading can be or become a sort of compulsive gambling?
Here we have to differentiate from short term trading and medium term trading, terrain in which, we mix investing and speculating. The former does not have much of a gambling component, whereas the second does very prominently. This is because randomness disappear in the long term.
The random behaviour, as I have said so many times, happens in the high frequency trading, as known as day trading.
There are many who think that day trading is an activity that a lot of people do for a living, as if it was something accessible to those who work very hard.
Compulsive gambling and day trading
The fact, the harsh reality, is that day trading is a field full of gambling behaviour, which is not much better than the one associated to any other gambling activity.
The trading industry always fuel itself of unknown traders of the reality of the markets. The amount of promises to Heaven makes it easy for millions of traders to fall in the death trap of day trading gambling.
Companies use phases like: “make 400% in one hour”, “make 80% profit in 15 minutes”, etcetera.
With such promises no wonder so many traders fall to that trap.
I say this because I was prisoner to that dilemma long time ago.
Yes, I had severe problems with trading addiction, in which I could not stop trading even though my bank account was being systematically destroyed.
Seemingly good strategies would not work and I would not understand why but my bank account was telling me it was not right.
Stock market addiction
The fact is that millions of Forex traders end up facing that situation every year, whether it is trading stocks, futures, Forex, Cfds, warrants, traditional options or binary ones.
I remember reading that in the United States there were cases of extreme addiction, in which trading had destroyed some people’s lives.
In some academic researches trading was believed to cause addiction.
Anyone who has tried day trading for long enough knows very well that the addictive problem is there, especially when you can look behind after many years of experience.
Obviously, when we are in the middle of our trading career we do not believe to be “hooked”. Actually we do not even think about it. We keep playing our losing system day after day thinking that it will eventually work.
Credit card and trading
I remember using the credit card countless times or calling my bank to make transfers because my account was reaching the margin levels.
I used to think: “my nice system needs only some more time to work”.
In most cases you do not realize until you are completely ruined, or luckily almost ruined. Eventually you “wake up” and start making some questions.
Day trading, as well as betting or casinos, is a hyper stimulating activity which comes with strong emotional components.
Although it seems rational, it is not really.
We try to revenge and get back all that we lost but that is the perfect moment for strategies like martingale and similar things.
Am I addicted to trading the markets?
A lot of people is confused.
When people talk about their failure in day trading they blame many different things such as lack of discipline, or being too emotional.
They basically think that the problem comes with a psychological factor, which is true, but only half true.
It is like that because even if they stayed calm and did not do more trades than needed they would lose anyway.
Actually, desperation and things like martingales come after the fact that they cannot win consistently. Those things are the consequence, not the cause of the failure in trading.
That is because this activity has a random component very strong in which even if we apply a very strict trading plan, like automated strategies, we will not be able to win.
Then after our “good” system does not perform as expected we start trading more than necessary and doing even worse things than before.
The truth is that not even with the best trading plan you will be able to defeat the random forces of the intraday world. This is something that should stick to your head.
Sport gambling and casinos work in a similar way.
The unavoidable loses that come with such business will be followed by acts of “desperation” in which the result is the total destruction of the customers cash account.
We are betrayed by our anxieties and nerves.
There are just a few who after losing a significant amount of money say “listen, I think this does not work, I should stop”.
Once you are in the middle of the activity it is very difficult to stop, since it is a physiological process in which things like dopamine are involved.
Your brain is used to that “fun” and wants more. It will not accept a “no” as an answer.
The same happens with other modern addictions like porn and online betting.
The common factor in all of that is that word: online.
It is there where the dangerous factor lies.
The old vices of alcohol and drugs see how there are new forms of addiction that joins them.
The effects on the brain of these new forms of addiction are as bad as or even worse than the old vices, because online gambling and porn come almost in unlimited quantities.
You need more money to buy more drugs but you do not need it for online porn or trading since you can do it with demo or simulated accounts any time.
Although trading is not as bad as porn, because when the money ends we have time to “think”. The problem is that trading is quite expensive in monetary terms.
Our brain is very tricky, especially when it sees some profit and finds itself in the winning side.
There is when the big problem starts. In that moment your brain and the bigger dopamine release trap your soul to the screen.
When the loses come it is very difficult to get out of that spiral, since your brain asks for more and more “drug”, and expects to win some day. But those wins are not much more than winning streaks, which even the casino gamblers, have from time to time.
The amount of people losing money every day is uncountable.
What is it the brokers in the world need to make a living?
What they need is the money that is in the traders pockets. The FED does not give them money for free really. It is the traders that do, although it is not for free.
The process requires millions and millions of traders playing every year huge amounts of money using any sort of high frequency trading.
The more frequency we use for trading the better for the brokers.
That is why markets as Forex or CFDs are so popular nowadays, because you can trade very heavily using very short time frames.
The Forex market makers must laugh a lot, of course.
When you find yourself in a situation where you cannot stop adding money to your accounts month after month, year after year, and without knowing why, you will always end up losing.
In that case it is likely you have an addition problem without knowing.
To get out of it you should ask for some professional advice or even to your family or friends.
The first step is to stop using the credit card and start thinking about the problem.
Do not worry. You will have more time to be rich in the future.
You know, in the casinos it is the house that wins, always. The same is the bingo, the sport betting houses and also the Forex brokers.
You are not a broker, you are a trader.
If you want to become a good trader you have to go away from the random behaviour.
You have to run away from day trading as much as we can.
Only then we will be able to see things with other perspective and be far away from addiction.
Regards and good trading.
Original article: la adicción al trading