Stock Market Addiction

Although stock trading and gambling have as many disparities as they have commonalities, the comparison is entirely legitimate. Both deal with playing with money and both deal with risks. Both also have hope and fear components which often lead to addiction.

According to Paul Ashe, president of the National Council on Problem Gambling, the most gambling performed in the world is performed in the stock markets.

The active investor’s addiction to trading is as strong as any form of addiction. Like gambling, active investing can be extraordinarily exciting for investors who, in turn, get carried away by winning.

Even medical studies confirm the release of the chemical, dopamine, when presented with the opportunity of a rising stock. The powerful allure of monetary rewards leads to the overwhelming urge of trading stocks.

It has been shown through brain imaging studies that the human brain treats the prospect of big profits the same way as the addictive nature of gambling, alcohol, drugs and other addictions.

So what specifically makes stock trading addicting? The reasons may actually be a lot more and may differ from person to person but the following can be considered true with most cases.

a.) Control. Investors appreciate the control they have over their situation and the freedom of making decisions for themselves in terms of trading and buying stocks. b.) Excitement. Like gambling, trading provides a certain level of excitement by making decisions and risks for the sake of a good return in investment. The more risk they take, the bigger potential for profit, the greater excitement it gives. c.) Easy return of profit. Casino gambling, lottery, raffle draws provide people a quick and easy way of earning money with minimal effort. This is true for stock trading as well. d.) Game. Active investors see trading as a game. It has entertainment value, a means of passing time, and the component of winning and losing. e.) Perpetuation. The problem with addictions such as gambling and active trading is the pitfall of perpetuation. As investors earn more profit with every stock trade, the more they are encouraged to continue trading, and at times investing more and more money. And with every loss, there is the desire to reverse the loss by intensifying their trading.

Investing via the stock market is a good way to grow your finances. But this should be coupled with the responsibility of keeping yourself in check before you cross the line into addiction.