Is trading dependency a real risk?
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Trading dependency is a reality. For a lot of people, trading is a bit like a drug. Once they've tasted it, they don't want to stop. The level of dependency varies depending on the traders but it always results in an irresistible desire to trade. The causes of trading dependency are diverse but the signs are identical for each trader. To manage it, there are several possible solutions.
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One question to ask yourself, do you have a trading dependency based on the above factors?
Causes of trading dependency
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Lure of profit
: Trading is not a game of chance (although many consider it as such) but there is money at stake. The possibility of being able to win some evokes many emotions in humans. At first, our brains equate trading with gambling (like in a casino) because we cannot fully control the success of trades, leaving room for chance. It is a stimulating activity that creates excitement and releases dopamine into our brain (dopamine = pleasure). Traders then try to regain this feeling of pleasure and the only way is to actively trade.-
Easy money
: Novice traders often see trading as a way to make a fortune, to change their daily lives, to become an independent trader, to live from trading. This is obviously an illusion, very few people live from trading. To live off it, you have to have a large amount of capital at the beginning. 90% of traders lose on Forex because they continue this obsession with easy money. Trading is an activity like any other, it requires work and time.-
Feeling of freedom
: Trading creates a sense of freedom for the trader. He is his own boss, no one tells him what to do. To escape the daily routine of work, some people take refuge in trading. This feeling of freedom is not found anywhere else.-
Passion for financial markets
: For some people, financial markets are a passion. There is so much to discover, to understand, to analyse. You can spend a lifetime there and still feel like a beginner. For the knowledge-hungry, the curious, trading can turn into a hobby (like an athlete who spends time practising his passion for sport).Signs of trading dependency
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Not thinking about the risk
: The lure of profit often makes traders forget the risks involved. Most of the time, novice traders don't even consider loss when they open a position, they are obsessed with being able to win it. It is an attitude that leads to the inevitable loss of invested capital. If, when you trade, you only consider the possible gains, it is a sign of trading dependency.-
Feeling excitement
: Trading does not leave room for emotions if you want to succeed in winning money. If you feel excitement, euphoria or your heart beats faster every time you trade, it means that you are taking too much risk or that you are not sure of yourself. In both cases, you will end up losing your money. Indeed, you link the success of your trade with gambling. Being happy or sad when you win or lose a trade is normal, but having excessive reactions is not. That hides something. Trading is for you like a casino. This is a sign of trading dependency, you are looking at trading as a source of pleasure (release of dopamine).-
Not being able to leave the screen
: If you can't take breaks from trading, it's a sign that you're addicted to trading. You need your dose like a drug addict before you feel full and at peace.-
Constantly thinking about trading
: If, when you stop trading, your only obsession is to start again, it is because you are dependent on trading. There are thousands of trading opportunities every day, if you miss them it doesn't matter. Moreover, to date, no study shows that the more time you spend trading, the more money you win. It's rather the opposite even.-
Wanting to redeposit
: If you want to redeposit funds when you have just razed your trading account it's a sign of trading dependency. You refuse to fail and to question yourself. Normally, losing your capital should put you off trading for a long time. Before redepositing, you need time to recharge your batteries, to reflect on the reasons for your loss, to perfect your education.-
Needing to constantly be in position
: Some traders can't stand not being in a position. They then try to open a position on anything, without respecting their trading strategy, just to satisfy their need to be in the market. If this is your case, it is because gambling money is a need for you, you can't stand to see your capital unused. This is a sign of trading dependency. Trading is then an obsession.-
No personal life
: If trading deprives you of leisure, sleep, and you feel isolated from your friends, then trading is a danger. This can be by personal choice (the desire to earn more and more) or by the obsession of trading. In both cases, it is a sign of a trading dependency. You must be able to flourish, to experience pleasure outside of trading.-
Conditioning your mood
: If ending your winning or losing trading day conditions your mood for the rest of the evening, it is a sign of addiction. If you have won money, you feel happy. If you lose some, you are frustrated and this frustration can turn into aggression towards your loved ones. This is a sign of trading dependency.-
If you take too many risks
: It’s the lure of profit that takes precedence over everything else in your home. You don't see trading as a way to make your portfolio grow, but as a way to win money in a minimum amount of time. We see it on binary options in particular, individuals use them like a casino, without any risk management, it’s double or nothing every time. Risk gives you pleasure, excitement. This is again a sign of a trading addiction.-
Feeling all powerful
: Sometimes in trading we can have a long series of winning trades, or finish a day without losing a trade. If it makes you euphoric, makes you feel invincible and want to take more risks to win more money, it's because greed has made you dependent on trading.-
The desire for even more
: Winning traders always want to make even more money. Novice traders often try to increase leverage, thinking that they are good at trading, if they have had a few winning trades in a row. For more experienced traders, there is no increase in leverage but a race for performance. Money is often not even useful to them but it is just personally satisfying to know that they can beat the market, to succeed where other traders have failed.How to recover from trading dependency?
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Set maximum loss thresholds
: To avoid letting your emotions take over (and risk taking additional risks to catch up on your losses), it is important to set a maximum amount of loss per day, per week, per month. You should always feel that you can make up for your loss quickly without taking any additional risk. For example, you can risk twice the average gain on a winning day. Once you reach that threshold, shut it down and go do something else. It will protect you from cracking psychologically and going on to raze your trading account in a single day.-
Establish fixed schedules
: To set your trading boundaries, you could set yourself a time slot during which you allow yourself to trade. Outside these trading hours, forbid yourself to open a position or turn on your computer. If you have an impediment one day, it doesn't matter, trade the next day.-
Take regular breaks
: Force yourself to take your eyes off your computer screen during your trading sessions. It keeps you rational. Watching curves for hours can drive you crazy. Having your nose to the grindstone is never good, it decreases your attention, it lowers your analytical ability and it prevents you from questioning yourself (you don't have time to think about what you are doing or have done). Breaks are effective during a trading session but you must also allow yourself weeks without trading in the year.-
Scrupulously respect your trading plan
: You should not open a position if your trading strategy does not give you signals. It is also important to carefully manage your risk. On the same product, do not vary the position sizes. Even if you trade manually, you must apply your trading plan automatically. Trading will become more boring, more repetitive but that is a blessing in disguise.Conclusion
One question to ask yourself, do you have a trading dependency based on the above factors?
