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The author of NoBrainerTrades is an independent asset manager specializing in FX instruments. A former hedge fund analyst, he also has experience working for several large investment banks, in both asset management and foreign exchange. NoBrainerTrades.com is a community of traders focused on... More
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  • Trading Addiction: Wasting Away Your Time and Money  0 comments
    May 18, 2011 10:24 AM

    The word “addict” conjures negative thoughts – it is a dependency, psychologically and physically, that has one spending his or her time on activities that have taken over other major aspects of life.  For some addictions, life’s activities are simply scheduled around it, taking the place of other crucial activities that allow us to thrive and be happy, productive human beings.

    When we hear the word addiction the usual association is to simply pin it to drugs, alcohol, etc.  But what about other behaviors?  Trading is certainly in no way excluded from this group and being addicted to it can be just as detrimental as any other.  It can affect you marriage, social life, finances, etc., in the same way that any other addiction can.

    Interference with Sound Judgment – When Execution Leads to Disaster

    The act of trading provides us with a certain rush or exhilaration which simply leads us to wanting more.  Upon execution there is a buildup of mixed emotions, or simply, a neurochemical response that begs us to do it again, and again, etc.  When this response interferes with sound analysis, proper planning, and every other desirable characteristic of a prudent trader, disaster can ensue.

    Photo by Kapermolen Hasselt

    Regulation and moderation in this sense are vital and realizing that the only way to truly achieve your desired goal is by not listening to the emotional impulse to trade instantly.  Many of us know this feeling, while not admitting to it or simply defeating it over time, yet have the ability to bury it and stash it in the “do not touch” area of our brains.

    Newer traders lacking daily support by those more experienced indeed have it the roughest.  As a trader attempts to start climbing the sharp learning curve associated with trading, he or she is going through a trial and error phase that can cause confusion, anxiety, and a host of other emotions.  This, combined with any losses that might incur along the path could have the person simply wanting to trade more until the cycle finally takes its toll.

    “But Trading is a Profession…It’s Different”

    The issue with trading and why many wouldn’t go so far to allow it to fall into the boundaries of an addiction is that for a lot people, it is a profession.  But in many banks and hedge funds, traders are the first ones in and the first ones out every single day.  They start early, end early, and leave the dirty work up to their operations teams.  The number of hours spent in front of monitors is considerably less compared to trading assistants, operations or tech infrastructure.  They come in, do their job, and leave.  Traders also tend to make considerably more money than anyone underneath them, hence the desirability to follow this career path.

    I find that the traders that tend to overdo it are the ones not accompanied by others that can simply regulate their behaviors.  There is no one present to tell them to cool it, and the cycle simply continues with the rush of dopamine swelling into their heads with every execution they make.  Another article hits the headlines, another trading session is on tap, a string of losses had them fearing for the future, etc.  Having someone or some others around that encourage you to do other things is perhaps one of the easiest means of ripping you away from your screens and focused on something else.

    Healthy Habits on Steroids

    Too much of anything makes you an addict.  Some of us are raised into addictive personalities while others are naturally much better in regards to moderation.  There are healthy habits, sure, but overexerting one’s self on that habit can lead to serious issues.

    For instance, working out and staying fit is one thing, but when it becomes an addiction it can cripple your body’s ability to heal itself in order to make progress.  Likewise, assuming trades and taking on risk can provide us with a good income if properly done, but too much of it falls into the category of overtrading and subsequently, undesirable outcomes.

    Overtrading is, as we regularly discuss here, the epitome of horrid trading circumstance.  This is the last category of which you ever want to be a part and kicking your healthy habits in overdrive is the quickest way to get there.

    The Work / Life Balance

    It wasn’t until I got married that I realized how much time I truly wasted in front of my monitors.  I get just as much done as I did prior to marriage, though I find myself spending a considerably greater amount of time on other life activities.  My wife is “the regulator”; she switches the gears in my head to move onto other topics and makes me realize, more often that is, that there are indeed other things of value in life other than electronic charts and numbers across tables and grids.

    Maintaining the balance between work and life is of course beneficial to both.  On the work side, your brain is refreshed and ready for action.  You can consume 5-10X the amount of information you would as opposed to being sleep deprived within the same window of time. On the life side, well, it’s life.  It is why we work in the first place.  There is no point in running yourself into the ground if it isn’t for some higher purpose.

    Cliché following: “Work Smarter, Not Harder” and Stop Rotting Away Precious Time

    Wasted time is common among daytraders, particularly those that have a lot of freedom.  It would take you a year just to read a day’s worth of materials on a given topic for this business; there is only so much news that is relevant to the market you are trading; writers, analysts, etc., just spin it in their own way, over and over again.

    It’s unenlightened redundancy that truly wastes your time.  Once you have what you need, take it, and move onto the next subject or task.

    By focusing in on what matters most and only reading the required bullets for any given day, you are able to internalize the data you see or read and relate it into movements of price.  But by constantly listening to the opinions of others you inundate yourself with the thoughts of someone that might not be providing you with the full picture in the first place.  Nothing is more valuable than raw observation.

    As a writer, I can wholeheartedly tell you that what I put on paper is never the full story in terms of what is actually going on in my brain, and there is no way that any other person will truly understand everything that I am thinking.  I can do my best to relay my thoughts but there will always be other components missed – these components could mean the difference between success or failure for anyone else reading them, depending on how that person perceives my information.

    So when you read for work, read for work.  Leave the opinions for leisure.

    Taking Breaks

    Taking breaks is perhaps one of the most widely under-discussed, but valuable actions that any trader can make.  Tunnel vision is about as common with traders as their analysis, and the former destroys the other.  Get up, shake it off, and do something else for a few minutes.  Make it a habit to dice up your trading sessions with time spent away from the computer.  You’ll come back clear-headed and refreshed, usually conjuring up another idea in your time away.

    It is tough – when you are in the middle of something you can’t just get away in a flash, or can you?  Think of it this way: if something horribly traumatic were to occur in the middle of your trading session, wouldn’t you put things down and simply walk away?  You are actually likely to get better as opposed to worse as you’re on-point, geared and ready to go for the next part of your session.

    ———————————–

    A boxing match has rounds for a reason…..run all 10 rounds straight and you end up with a couple of duds in the ring.

    Do you frequently have tunnel vision? Are you compounding losses by overtrading? Is your social life going in the dumper? Take it easy, relax, get away and remember why you trade in the first place.  Every day counts, so make them work to the best of your abilities.

    Original Article: http://www.nobrainertrades.com/2011/05/trading-addiction-wasting-away-your-time-and-money.html

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