Like any other addiction, day-trading addiction can lead to destructive behaviors. Compulsive traders may neglect their health and relationships to pursue profits and take excessive risks to hit it big.
It’s no secret that day trading can be a risky business. Every day, traders are bombarded with information and must make split-second decisions that could make or lose them money.
For some people, this high-pressure environment is exhilarating. They thrive on the challenge and the potential rewards. But for others, it can be addictive.
If you’re worried that you or someone you know may be addicted to day trading, here are some signs to look out for.
1. Unsuccessful Attempts To Regulate or End Day Trading
You’re not alone if you struggle to control your trading habits. Many people have found that, despite their best efforts, they need help to stop or cut down on their trading. For some people, it can be a severe problem that leads to financial ruin.
Day trading can be risky and unpredictable. It’s often compared to gambling because there’s an element of chance involved. Like other forms of gambling, it can be adrenaline-inducing and produce a sense of euphoria when successful, making it hard to stick to set limits or rules.
Day trading can also be time-consuming and stressful. It can take up your free time and energy, leading to burnout.
2. Experiencing Irrational Desires To Do Things Linked to Trading
Individuals with a day-trading addiction may feel an increased need to engage in more frequent trading to achieve the same level of pleasure as before, even after losses.
A study found that most day traders are unsuccessful, and many continue to trade despite significant losses, which is inconsistent with rational speculation and learning theories.
Another study found that individuals who engage in frequent daily trading are more likely to display addictive tendencies than those who trade less frequently.
Several factors can contribute to someone developing a trading addiction. For instance, people who are naturally competitive or have a gambling problem may be more prone to becoming addicted to day trading. Additionally, easy access to trading platforms and 24-hour markets can make it harder for people to control their urges.
3. Increasing Financial Risk Without Planning or a Strategy
One symptom of day-trading addiction is increasing your financial risk without much planning or strategy in advance. This serious problem can have devastating consequences for the individual and the family.
In a study published in the Journal of Addictive Behaviors, researchers found that day traders had high impulsivity levels, a key characteristic of many addictions.
The same study found that day traders were more likely to take risks than other investors, even when they did not consider essential information about the potential payoff from the investment.
For some, day trading may be motivated by an attempt to satisfy an emotional need rather than rational decision-making.
4. Obsessive Research & Trading
Many people suffering from day-trading addiction report an uncontrollable urge to research and trade stocks, currencies, futures, and options. This compulsion can often lead to obsessive behavior, as sufferers feel like they must constantly be in the know to make a profit.
5. Obsessively Monitoring Positions and Financial Markets
Many people don’t realize that one of the main symptoms of day-trading addiction is continually monitoring positions and obsessively monitoring the financial markets.
It may not seem like a big deal initially, but it can quickly spiral out of control. For example, a trader might start checking their positions every few hours during the day, then every few half hours, and finally every minute.
Doing so interferes with their personal life and makes it impossible to focus on other essential tasks. Worse yet, this constant monitoring can lead to poor decision-making and costly mistakes.
6. Tension, Worry, Depression, or Other Mental Health Issues
A study found that individuals who engage in day trading are more likely to experience symptoms of depression, anxiety, and irritability compared to those who do not trade regularly. Moreover, individuals with a history of substance abuse are more likely to develop a day-trading addiction regarding their participation in speculative financial activity.
7. Lying to Friends, Family, or Coworkers
Lying to friends, family, or coworkers about trading or trading-related activities can be a problematic day-trading symptom. It can be challenging to admit there is even a problem. However, if you are concealing your activities from those close to you, it is likely that you are not comfortable with your level of trading activity and may be subconsciously trying to hide it.
8. Mismanagement of Important Funds
A few studies have looked at the issue of day trading and its effect on finances. One study found that about four out of five day traders end up with marginal losses due to their trading activities.
Some day traders may go as far as selling personal items or taking out loans to finance their trading habits. Unfortunately, one study found that not only are individuals mismanaging funds but so might the firms with whom they do business.
9. Day Trading Despite Potential Negative Effects
Here’s a look at how day-trading addiction can impact your life:
- Social Life:When you spend all your time and energy on day trading, you’re likely to neglect your friends and family. According to Investopedia, people who suffer from day-trading addiction tend to spend more time trading than they do with their families and friends.
- Career:Day trading can be highly time-consuming. As a result, you may need to catch up at work or even lose your job altogether.
- Education:You’re likely to spend less time studying or attending classes. This can lead to poor grades and eventually dropping out of school altogether.
- Previous Hobbies and Activities:There’s less time for other things in your life, leading to boredom and a sense of loss of purpose.
10. Requesting Financial Assistance From Others
According to a few case studies published in the Journal of Addictive Behaviors, day traders seek financial assistance from family and friends only to lose it all, sometimes including their relationships.
The study concluded that every one of them had a disease similar to addiction. It also suggests that even through heavy losses, addictive behaviors form, leading them to ask for money to continue trading.
Resources used in this article:
- https://www.sciencedirect.com/science/article/pii/S0033350622000348
- https://www.sciencedirect.com/science/article/pii/S0306460315300721
- https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8076356/
- https://faculty.haas.berkeley.edu/odean/papers/Day%20Traders/The%20Cross-Section%20of%20Speculator%20Skill.pdf
- https://www.sciencedirect.com/science/article/pii/S0306460315300721?ref=pdf_download&fr=RR-2&rr=771c6beb4ba3a3c4
The Takeaway
If you think you might have a day-trading addiction, there are a few things you can do to try and curb your urge.
First, set limits on how much you trade each day or week, so you don’t go overboard.
Second, try not to trade on emotions; instead, stick to a clear strategy that you have devised based on research and analysis.
Finally, take breaks from trading now and then to clear your head and recharge.
If you continue to have trouble controlling your addiction, it may be worthwhile to seek professional help from a therapist or counselor.
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