Day trading has grown in popularity during the COVID-19 pandemic. This is likely to have been driven by more free time during lockdowns, financial uncertainty, job insecurity and increased game-like features on mobile trading platforms which has attracted a new generation of investors. However, there is a dark side of day trading which includes addictive behavior, financial difficulties, and poor mental health and well-being.
This blog explores the factors that contribute to the progression of day trading from a hobby or career into an addiction. It outlines the common signs of day trading addiction and explains where to get help if your trading activities are getting out of control.
What is day trading?
Day trading is a type of financial trading aimed at making money from very short-term investments. It involves buying and selling financial products (such as stocks, currencies, futures and options) on the same trading day or even several times a day. While some people with in-depth knowledge and experience of financial markets can make a successful career from it, others can suffer severe day trading losses. Whether someone is a veteran day trader or new to this type of investing, day trading can quickly become addictive.
What is day trading addiction?
Although there is no official definition for “day trading addiction”, Kindbridge Advisor Dr Timothy Fong, clinical professor of psychiatry and co-director of the UCLA Gambling Studies Program, believes it bears similarities to gambling disorder. He defines gambling disorder as excessively “placing something of value on an event of uncertain outcomes in the hopes of winning or earning a larger reward” and recognizes that “activities such as playing the financial markets… show cognitive, motivational and personality parallels between gamblers and stock traders.”
Why can day trading become addictive?
Day trading can become addictive for the same reasons that gambling can become addictive. When a day trader gets a thrill from researching new investments or an adrenaline rush from making a large profit, the brain releases dopamine – the feel-good neurotransmitter and the brain’s reward system. Over time, the brain becomes reliant on this type of stimulation. This can cause addiction as the day trader needs to make more and more investments to induce the same level of pleasure, excitement and euphoria.
There are also psychological, genetic and socio-cultural factors that can increase the risk of someone becoming addicted to day trading. Co-occurring mental health conditions such as stress, anxiety, depression can make someone more susceptible. A family history of gambling may make a person more at risk of developing an addiction. Social influences and peer pressure from friends and colleagues can also increase a person’s likelihood of problematic gambling. People who are pleasure-seekers or impulsive risk-takers are more disposed to developing an addition to day trading.
How many people are addicted to day trading?
Two 2019 surveys into compulsive gambling in financial markets found that around 8% of investors displayed symptoms of problematic gambling of whom around half fulfilled the criteria of gambling disorder (based on a diagnostic checklist from the American Psychiatric Association). The research concluded that investors with symptoms of gambling disorder “tend to follow a more active and speculative trading style, indicated by a higher frequency of stock trading, day trading and investing in derivatives and leveraged products.”
Is day trading investing or gambling?
The Financial Times recently reported that gambling addiction helplines are receiving an increased number of calls from day traders. It explains that the rise of mobile brokerage applications has brought the experience of investing platforms closer to online gambling and sports betting.
Keith Whyte, executive director of the National Council on Problem Gambling, believes that “the user experience is converging and the line between gambling and investing, which was already pretty fluid, has almost been completely erased.”
Felicia Grondin, acting executive director of the Council on Compulsive Gambling of New Jersey, said that in the early days of the COVID-19 pandemic (when many live sports events were cancelled) some gamblers turned to trading platforms to experience the same thrill. Her organization’s gambling helpline has received an almost 50% increase in calls related to day trading since the start of the pandemic.
It therefore appears that the investing vs. gambling day trading debate is coming out in favor of gambling.
Common signs of a day trading addiction
It can sometimes be difficult to gauge whether a person’s day trading activity is a harmless hobby or it crossed the line to become an all-consuming addiction. Here are some common signs that you, or a loved one may be addicted to day trading:
- Making repeated attempts to control, cut down or stop day trading, without success.
- Experiencing uncontrollable urges to engage in trading-related activities.
- Taking increased financial risks without much prior planning or strategy.
- Trading to recover losses and restore control but in most cases losing more money.
- Needing to make bigger and/or more frequent investments to achieve the same adrenaline rush.
- Obsessively researching and trading stocks, currencies or futures and options.
- Compulsively watching the financial markets and continuously checking positions.
- Losing interest in social and leisure activities because of the time and energy spent trading.
- Feeling stressed, anxious, depressed or other mental health symptoms when not trading.
- Lying or hiding trading or trading-related activities from friends, family and colleagues.
- Selling assets, taking out loans or using money that should be spent on household bills to trade.
- Resorting to theft, fraud or other illegal activities in order to continue day trading.
- Engaging in day trading despite negative consequences to financial stability, relationships, career, education, previous hobbies and activities, or physical and mental well-being.
- Asking others for financial help because large sums of money have been lost through day trading.
- Having suicidal thoughts due to financial losses.
Many of the warning signs of day trading addiction are similar to the signs of gambling addiction. Read more about the Signs and Symptoms of Compulsive Gambling.
How to get help for day trading addiction
It’s common for people addicted to day trading to have co-existing mental health conditions and all unhealthy behaviors should be addressed at the same time.
At Kindbridge, our highly-trained counsellors are experienced at providing specialized treatment for gambling addiction – including day trading addiction – and any underlying mental health conditions that may co-occur. After assessing your needs, we’ll design a treatment program that’s tailored to your personal goals.
Take our gambling disorder test then get in touch to book your free and confidential 30-minute consultation