Has Your Trading Become an Addiction?

Can your toxic habits in the market have turned into addictions?

Can some of the trading mistakes you can’t stop repeating be considered addictive behavior?

If so, is it possible to implement the same processes used to deal with addiction in treating those mistakes?

In this newsletter, I bring you a bold view on the connection between overtrading and addiction.

At the end of the newsletter, you’ll find a practical activity that will give you an understanding of your own overtrading or revenge trading problem.

Substance or Behavior?

In Roman law, an addiction was a person that became enslaved through a court ruling.

Renowned addiction expert, Dr. Garbor Maté defines it as any behavior that the person finds relief and therefore craves in the short-term, but suffers negative consequences in the long-term and doesn’t give up despite those.

Craving, pleasure, short-term relief, long-term harm, and inability to give it up are the hallmarks of addiction.

This says nothing about substances in particular, a false assumption that many people make; it includes any human behavior characterized by those features. That could be eating, shopping, gambling, heroin, self-harm, relationships, bulimia, work, pornography, gaming, social media, caffeine, anything…

Can Addiction Come From Past Trauma?

There is a tight connection between trauma and addiction.

Trauma is a psychological wound. It comes from an event where our emotional needs were neglected and therefore it had a big emotional impact.

Later on in life, certain things can trigger the memory of those traumatic events and expose the wound.

The characteristics of a wound are sensitivity: when you touch the wound, it hurts. That’s when you’re triggered - you recall the same emotional response of the past. If the situation carries a big pain, this will be reflected not only when you’re triggered but in many of your behaviors.

The other aspect of a wound is that it scars over. Scar tissue doesn’t grow which means people get stuck at certain levels of emotional development. It neither has nervous terminations, so you don’t feel it, which means people who are traumatized disconnect from their bodies and feelings as a way to protect themselves.

Trauma represents the organism’s defense mechanisms to deal with the situation at the moment. But it creates all types of problems later on in life: mental and even physical illness. The emotional system is tightly connected with the immune system. If one isn’t working well, the other one will suffer. This explains the fact why cancer is mostly seen in people who were before suffering on an emotional level: too much stress, anxiety, and negativity in their lives.

When the pain gets too big the person can’t handle it and gets into addictions to soothe that pain.

This is the reason why more and more people become addicts (remember, any behavior can become an addiction): trauma in early childhood has been increasing because of the tough environment at home: parents live stressful lives and end up repressing the child's emotional needs. Not because they don’t love them, but because they don’t know better. Lack of awareness is where the problem begins.

If, as a child, your emotional needs weren’t met for some reason, you’ll repress your emotions and disconnect from them. Later the body and the mind seek to heal through reconnection. That’s where addiction enters: a way to reconnect and find the attachment missed in childhood.

Not why the addiction, but why the pain?

- Gabor Maté

Consider the 5 hallmarks of addiction: craving, pleasure, short-term relief, long-term pain, and inability to give up. Now, please answer:

Do you currently have or had any addiction?

Think it can be any behavior that causes short-term pleasure but long-term harm and you can’t give it up. Don’t get attached to the common addictions you heard of and don’t underestimate what can be your addiction.

What do you get from your addiction in the short term?

You might answer: Relief from pain, escape from reality, alleviation, a sense of control, relief from anxiety and stress, serenity… These are good things. It’s good to get relief from pain and stress. But where did the pain, anxiety, and stress come from in the first place?

The point is: addiction is not the primary problem, addiction is an attempt to solve the problem of suffering.

So the question that Gabor’s Maté proposes is not “why the addiction?” but “why the pain?” and what pain are you trying to escape from?

Given all this, let’s turn to the trading context. Can your urge to repeat some behaviors in the market be considered a trading addiction?

• The trader who can’t stop oversizing after a certain amount of losses, out of frustration.

• The trader who can’t stop overtrading, even being aware of it, after some missed trades.

• The trader who adds to losing positions with fear of being wrong as price moves against her direction.

The answer can be yes or no.

Overtrading can well fit the hallmarks of addiction: Craving (the money back or the sense of being right), pleasure (satisfaction of emotional needs), short-term relief (alleviation of pain), long-term harm (to yourself and your trading account), and inability to give it up (the repetitive behavior even after acknowledging the harm and the desire to quit with it).

The urge for action you feel most of the time is your “high”. You feel uncomfortable when you’re not in a trade and you can’t help yourself but find reasons to enter one. Then, it most likely has become an addiction.

Is this exaggeration considering all the other more dangerous addictions like heroin, for example? There are stronger traumas than others but it’s not about the substance or the behavior in itself; it’s about your intern relationship with it. In both heroin addiction and overtrading, the addict is looking for relief from pain and suffering. The object of addiction is different, but the reason that leads to it is similar: relief from pain.

If there is trauma, it will be expressed in some form in the present. It doesn’t necessarily mean that’ll be translated into addiction but the probabilities increase exponentially. Trading can be the way you express that addiction. So know that your overtrading problem comes from the past, not from the trading situation you experience at the moment. So the next time you feel the urge to your trading mistake, being overtrading, oversizing, or revenge trading, acknowledge that your emotional response isn’t in agreement with the present situation, you’re just recalling an old response. Tell to yourself: “I don’t need to take a trade, I just believe that I need”.

Look deeper into your life and spot other types of addictive behavior you might have.

Why are your methods to solve your overtrading not working?

Overtrading, revenge trading, adding to losers… these are so common in trading, that they end up being normalized. But because most of the traders suffer from them doesn’t mean it’s normal. It just means more and more people struggle with trauma and the inability to regulate their emotions.

There’s a lack of knowledge about trauma and a lack of self-awareness in today’s society even more than centuries ago. Everything is built to take us out of the present moment, the only way to heal.

People struggle to cope with their traumas and traders are no exception. They try to solve overtrading with methods that only scratch the surface but don’t address the root of the problem. I see this all the time.

Healing

Looking at your journals and rationalizing how to choose better next time is superficial for the work required - heal from addiction. Saying to yourself you have to be more patient next time is not worth much if you don’t back it up with an action plan.

The solution is about recognizing what happened 15, 20, or 30 years ago - the events that could’ve possibly led to trauma - but most importantly recognizing their manifestations in the present moment.

You do that by reconnecting with yourself: with your body primarily and with the emotions that you lost.

And when you do reconnect, you recover. Recover means to have something back; to find something again. That something is yourself.

Diagnosing Your Overtrading Addiction

The practical activity of this week is one by Brett Steenbarger, one of the most well-respected figures in trading psychology.

The following 10 questions are used in therapy to diagnose alcohol or any other addiction.

Read each one calmly:

1) Have you found that your drinking is bringing unwanted, negative consequences?

2) Have you recently felt guilty over the way you have been drinking?

3) Do you find you need to drink more just to get a good feeling?

4) Do you find that your personality changes when you drink excessively?

5) Do you find it difficult to take a break from drinking, even when part of you knows that this would be best for you?

6) Do you find yourself drinking to feel good about yourself?

7) Do you sometimes feel that you cannot control how much you drink?

8) Do you find yourself getting angry when someone close to you questions your drinking?

9) Do you find yourself vowing to limit your drinking, only to slip back into overdrinking?

10) Do you find it difficult to not drink given the opportunity, even when the occasion is not really appropriate?

Now for the topic of destructive trading please answer the questions but replace the word “drinking” with “trading”, and the word “drink” with “trade”.

Were your answers “yes” to most of the questions?

Then it's likely that your trading has become a way to satisfy your unmet emotional needs.

This is something that requires a deep approach but here's a small exercise that'll help you:

Whenever you are triggered in a market situation, it’s a chance to explore yourself. Take those moments as opportunities.

The next time you feel the urge to overtrade, stop for 5min. Prove yourself you can interrupt the course of the behavior just for 5min. What you’re doing is creating more space between the emotion and the behavior. You can use that space to your advantage by writing your emotions down or going for a 5min walk. The bigger you can make that space, the less probability you’ll continue with the old behavior.

The greatest trading problems are addictive in nature.

Successful traders really want to trade; they have a passion for trading. Addictive traders need to trade to fulfill their emotional needs. It becomes a matter of survival, and that’s why they can’t stop it.

An addictive trader won’t manage his risk. That is because the risk is part of the high. So he oversizes and adds to losers.

An addictive trader won’t stop trading even when losing money. That's because action, not profit, is the goal.

An addictive trader will cycle between periods of guilt and responsibility and periods of excess and irresponsibility.

Good traders trade actively. Addictive traders overtrade.

If you’ve realized your overtrading has become an addiction, find help. Continuing trading without addressing the problem won’t make it disappear. Do it for the sake of healthier trading and above all, healthier life.

With love,

Sara

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P.S. If you’re struggling with overtrading or other types of problematic behavior affecting your performance and results & if you’re committed to correcting them, The Peak Performance Trading Program is for you. Fill out the qualification form here to know more about it.

*you must have a minimum of 2 years of trading experience in a live account and a strategy in place.

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Whenever you’re ready, there are 2 ways I can help you:

1- Learn to use emotions in trading with my E-Book here

2- Elevate your trading performance with The Peak Performance Trading Program. Fill out the qualification form here.