DO YOU KNOW
someone who can't stop trading stocks online, no matter how much money he or she has lost? It could be a case of online-trading addiction.
Although the affliction isn't talked about much, counselors who work with compulsive gamblers say it's no less serious than what ails the gambler who can't stay away from a casino. The Council on Compulsive Gambling of New Jersey, which has a special section on its Web site devoted to stock trading, estimates that 5% of all online investors exhibit the tendencies of a compulsive gambler.
Last year's market downturn made the problem more apparent. Thousands of people around the country simply couldn't stop trading prompting a deluge of calls to counselors from concerned family members.
"The technology revolution has been wonderful, but it's also a two-edged sword," says Christopher Anderson, a Chicago-area counselor who specializes in treating professional and amateur traders with gambling addictions. "Today there is much greater accessibility [to the markets], and people are getting hurt faster."
Anderson, who runs the Gambling Recovery Center, speaks from experience. A former stockbroker, he left the business more than a decade ago after realizing that he wasn't merely trading stocks he was gambling. "The greatest casinos in the world are the floors of the exchanges," he says. "I was doing it from my own account. Gambling my own money."
Back when Anderson was working in the brokerage business, the demimonde> of trading addicts was mainly populated by brokers and high-stakes investors. Now, with the advent of online trading, it's possible for just about anyone with a compulsive personality to get into trouble trading stocks. Anderson says he's currently counseling about 10 people addicted to online trading, most of whom have lost lots of money recently.
With the Internet becoming a bigger part of our daily lives, counselors and psychologists are seeing more people with a variety of so-called Internet addictions. The two biggest Net addiction problems, experts say, involve pornography and "relationships." But right behind those is online-trading addiction. Kimberly Young, a Pittsburgh psychologist and founder of the Center for Online Addiction, says compulsive online traders are overwhelmingly young and male, are big risk-takers and trade heavily on margin (using money borrowed from their brokerage).
Of course, many investors could fit that profile and aren't classified as addicts. Just because someone buys and sells stocks often doesn't necessarily mean he or she has a problem, experts say. Day trading is a legitimate way to earn a living, even if it's inappropriate for most people. It becomes a problem only when people are unable to stop day trading even when they're on a long losing streak. Another red flag is when trading stocks becomes a game an end in itself rather than a vehicle to earn a living or build a retirement nest egg.
The following are the warning signs of a possible online-trading addiction:
You're a thrill seeker and enjoy the challenge of trading as much as and maybe even more than making money.
You're a big risk-taker, willing to gamble large sums of money on a few stocks.
You invest heavily on margin and are probably overextended on other credit lines.
You have unrealistic expectations about a stock's prospects for increasing in value and the general direction of the market.
Family members and friends express concern about your trading.
You try to erase your losses by taking bigger risks.