Forex Psychology - Trading Can Be Addictive

Forex Psychology - TRADING AND ADDICTION

‘Addict’ is a dirty word associated with the perceived down and outs of society, those who sleep on a park bench or live from one needle to another. But addiction invades slowly and surreptitiously and can hit anyone at anytime, although some are more susceptible than others. Genetic components definitely can and do play a role. Research has shown that the brains of addicts metabolize and process their drug quite differently from non-addicts.

So how does forex trading fit into all this? Trading exercises the brain and the will. It involves ongoing analysis and problem solving, and it requires the steady development of performance-based skills. Serious players of chess and poker enjoy similar benefits. Talk to successful athletes and you’ll find they have developed themselves, not just their bodies.

There are times, however, when trading becomes a vehicle for destroying mind and soul. You won’t hear brokers, trading publications, or seminar speakers talking much about this problem, because their common aim is to keep the public trading and buying trading-related products. But trading can become an addictive activity.

Forex Trading coaches and psychologists will talk about losing “discipline”, but rarely will they use the “A” word. Discipline you work on, addictions you get rid of. If you get rid of a trading addiction, there goes the trading coach.

MANY TIMES, LOSSES OF DISCIPLINE IN THE MARKETS ARE RELATED TO ADDICTIVE PATTERNS OF BEHAVIOUR.

An addiction occurs when an activity provides a strong source of stimulation that, over time, a person becomes psychologically and sometimes physically dependent upon. We generally label a behavior as an addiction when people seek out the activity even in the face of demonstrable negative consequences. It is the inability to stop the activity when those consequences interfere with life that marks any addiction.

Let’s look at statistics:

According to research 2 million adults (1% of the population) meet the diagnostic criteria for pathological gambling. Another 4-8 million adults (2-4% of the population) can be considered problem gamblers who are experiencing direct problems as a consequence of gambling. Trading fits into this category. When you enter the market with the pure intention of making as much money as possible, this is gambling. There is no plan, no structure, no goal. The expectations of limitless wealth dance before your eyes and what keeps you hooked is the occasional ‘big fish’ you catch. What is ignored are the overwhelming ones that escape.
In psychological terms this is known as ‘Random Reinforcement’. Random Reinforcement’ can be defined as: ‘having behaviours reinforced with positive or negative results on an inconsistent basis’. So today we perform a certain action and are rewarded for it. The same thing happens tomorrow, but then on the next day, we perform the same action and are punished for it. And so on, in a random manner. This makes effective learning impossible. In the market we cannot avoid this situation. All we can do is recognise it, stick with our rules and discipline and detach ourselves from the money. You have to feel good about your trading, not whether you made or lost money, but on your ability to stick to your rules. Rules and discipline are the only consistent things in an inconsistent darwinian environment.

Further research in psychology and psychiatry finds that between 14 and 16 million Americans meet diagnostic criteria for alcohol abuse or dependence. Between 4-6 million Americans are dependent upon illegal drugs.

Rates of substance abuse among men ages 18-44 are double those of the general population.

A family history of addictive problems is one of the best predictors of risk for addiction. peer influence is another significant risk factor.

According to a research review in the Oxford Textbook, rates of depression are significantly higher among people with addictions than in the general population, with indications that people are using the addictive activities to medicate themselves for the pain of depression. suicide statistics for addicts are high as they often see no other solution to their addiction. this fact is quite pertinent in the present global economic downturn. how many have taken their lives in the past months as their ‘empires’ have collapsed? their addiction to the rushes of adrenaline caused by high-risk thrill-seeking behaviour, without regard for the consequences to themselves or others, has proved as fatal as any other poisonous drug.

Addictions are also most common among individuals with attention deficits and hyperactivity problems and appear to be related to sensation-seeking among those needing stimulation.

Even if we assume that traders do not have more frequent addictive behaviors than the general population, the statistics tell us that, in all likelihood, nearly one trader in every ten has a diagnosable addictive problem.

For the trader with attention deficits who cannot tolerate boredom or lack of stimulation, forex trading provides action.

For the trader who is depressed, trading can provide an escape from the self and a sense of immediate gratification.

Such traders need to trade and keep trading when they have no edge whatsoever.

They lose their money, generate failure experiences for themselves, and create hardships for their families.

For them, it’s not about “discipline” and following trading rules. For the addict, such efforts are useless. The only solution is getting their lives back. And getting the right kind of help. If you see any aspect of yourself in this portrait, do the right thing. for you, and also for those who love you. Trading should expand your control and self-mastery, not become an instrument for their destruction. The sole purpose of trading is to make money, not to feed an emotional deficit.

One question i put to you: ‘what would you do if you could not trade?’ If you draw a blank, you are in trouble. It is like asking the alcoholic ‘what would you do if you had to stop drinking?’ The answer to the latter is usually ‘life is not worth living’. Ask yourself….has trading become so much part of my life that I could not live without it? What would I do INSTEAD of trading if I had to?