Don't Let Trading Become Gambling Addiction

January 25, 2017 15:26

Dear Traders,

As a professional market player, I'm used to being asked a lot of questions by less experienced traders. Some questions, though, tend to sound almost exactly the same:

  1. Is investing in the Forex market gambling?
  2. Is investing in CFD market gambling?
  3. Is Forex the form of gambling?
  4. Is the stock market a form of gambling?

Let me explain.

As we know, gambling consists of placing a bet on the outcome of an event. There are many different occasions to place a bet on—sports contests, horse races, lottery, blackjack, roulette, etc.

But regardless of the gambling arena, we are always faced with the same problem.

The problem is prediction, i.e. our inability to stack the odds in our favour. The prospect of winning a huge profit falsely motivates people to take abnormal financial risks and eventually leads to addiction.

Speaking of which, let's explore what this really means.

What is a gambling addiction

According to Mayo clinic, the compulsive gambling, also called gambling disorder, is the uncontrollable urge to keep gambling despite the toll it takes on your life. Gambling means that you're willing to risk something you value in the hope of getting something of even greater value.

Gambling can stimulate the brain's reward system much like drugs or alcohol can, leading to addiction. If you have a problem with compulsive gambling, you may continually chase bets that lead to losses, hide your behavior, deplete savings, accumulate debt, or even resort to theft or fraud to support your addiction.

We already explained how we think Forex is different to gambling but it is time to discuss another important topic.

How can Forex trading become an addiction

Source: Pixabay

It is mind-blowing that an average person can turn on a PC, access the internet, and with just a few hundred dollars place a series of market orders and become financially independent.

Whenever a trader makes a good profit, their emotions rocket sky high. This feeling is what we call "euphoria". Being euphoric is not beneficial to Forex trading, though.

Euphoria leads to overtrading, where traders are making too many unnecessary trades. What usually happens is that they start losing. Having seen their profits turning into losses, they succumb to revenge trading.

They manifest some kind of false confidence that they will score a so called "Big Hit", eventually win back everything they lost, and even earn money at the top of it. They appear to be spellbound and mesmerised by the flickering ticks of their trading platforms.

They're also convinced that the "millennium" trade is just ahead. All they need is to keep watching, hoping and clicking. And sometimes they will get lucky and win.

Most of the time, they lose.

Quite often, they lose big but keep going because they are in a vicious downward cycle. Revenge trading is a recipe for complete disaster. All it leads to is more despair, loss of money and total psychological and financial destruction.

How to deal with Forex addiction

Only obsessive people have achieved something significant in their lives. Dull people have nothing to achieve. If you take a look back at some of the great scientists, philosophers, doctors, musicians and traders, they were all completely absorbed in what they did.

But the thing is, they knew when to stop.

If you simply like and enjoy trading, it doesn't mean you're addicted to it. But when you're still trading despite numerous other things you should be doing instead—well, that's a problem.

The key is to know when to stop. Otherwise, you're going to end up in a cycle that is so familiar to addicts of every kind—overdo and regret, overdo and regret. Rinse and repeat.

So how do you keep your addiction in check?

Step 1: You need to admit that you don't hold the power over the markets. The market is a living thing. To believe you have a full control over it is delusional and will lead you to bad trades.

The best you can do is take advantage of a good trading plan that has a profitable probability model and can give you an edge over time. No one knows exactly what the market is going to do at any particular time.

Step 2: Assess gambling addiction signs. Talk to yourself. As a trader, you need to know what makes you lose. Not just your trading style, but how you react to stress, loss, or situations that are hard to control. What personal burden you might carry that affects your trading success negatively.

Step 3: When you make money and when you feel that your emotions are at the peak, stop trading and step away from your PC. As a successful trader, you must strive to eliminate your weaknesses, and play off of your strengths.

There are hundreds of ways to trade, and you have to learn that there will be some trading strategies you will not be good at. You may never be good at trading news, or scalping, but you can make just as much money using Price Action or Wolfe Waves.

All gamblers go broke because the pain of losing is felt so much more intensely than the joy of winning. Thrill junkies choose gambling for the intensity of the experience. You as a trader need to treat need this as a business.

If you learn how to control all those emotions and the stress created by them, you should never have to worry about trading Forex as a gambling addictive.

Cheers and safe trading,

Nenad


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