Have you ever wondered about what the difference is between stock trading and gambling? While stock trading does not have the same stigma attached to it as gambling does, there are a surprising amount of similarities between the two. But is stock trading considered a form of gambling?
What is Stock Trading?
Stock trading is the process of buying and selling shares in a company or other financial asset. The goal of stock trading is to profit by predicting how the price of a stock will change over time and increase the value of your investment by waiting for it to go up in price to sell.
In stock trading, short-term gains are valued over long-term gains. The short-term approach is what differentiates stock traders from stock investors.
Why Do People Trade Stocks?
People trade stocks for a variety of reasons. Some people trade stocks to make money, while others trade stocks to hedge their investments or to profit from price fluctuations.
Others trade stocks as an investment opportunity, hoping that the stock will eventually be worth more than what they paid or they speculate on whether the company will have better results in the future.
Whatever the reason may be, trading stocks is risky business and should only be done with caution and proper research.
What is Day Trading?
Day trading is a type of stock trading, focused on buying and selling assets on short notice in an attempt to make profits as quickly as possible. This type of trading is so fast-paced that traders are buying and selling the same stocks within a single day.
Day trading is not the same as investing. Investing tends to be more stable and offer greater opportunities for growth over time. This is because, rather than reacting quickly to market fluctuations, you typically wait for longer-term trends to play out before moving your funds.
While day trading can potentially be profitable in the short term, it is usually risky and volatile, which means you will likely experience significant losses as well.
Similarities Between Day Trading and Gambling
Both gambling and day trading are risky activities that can have a significant impact on your finances.
There are several similarities between these two activities:
- Involve high levels of risk, and you could end up losing everything.
- Produce feelings of excitement and thrill.
- Focused on short-term gains rather than long-term success.
- Risk of big financial losses.
- Decisions are made impulsively
- Luck is involved.
- Neither is a sustainable source of income.
Day trading does not carry the same stigma as gambling, but it does share a lot of similarities to gambling, and day trading could be a gateway into other forms of gambling.
While day trading involves some skill (using logic and analysis to make informed decisions about which stocks to buy or sell), there is also a great deal of luck that is involved, since it cannot be predicted with complete accuracy which direction the stocks will move in.
Can You Get Addicted to Day Trading?
Yes, it is possible to develop a behavioral addiction to day trading, and it happens for the same reason that gambling is addictive. When a day trader makes a profit, the brain releases "feel good" neurochemicals like serotonin and dopamine.
According to experts, stock price fluctuations that are extreme and unpredictable produce a similar "high" to that felt by gamblers. Your hormones may be stimulated by this cycle of ups and downs, which may even cause trading withdrawal symptoms.
Day trading is attractive for the same reason that gambling is attractive - there is the possibility of making a profit. With online trading apps available, it has become all too easy for people to continue making trades while they are at work, out with friends, or sitting at home.
Why is Day Trading Addictive?
One reason why day trading could become addictive is because it involves a lot of short-term thinking. As a trader tries to make quick decisions based on limited information, his or her focus narrows significantly.
Those who have underlying mental health conditions, or other addictions, are more susceptible to developing a day trading addiction.
Day traders often think similarly to those who believe they are professional gamblers. They have the illusion of control, and believe that since they have done their research on particular stocks, that they have the skills required to make smart trades.
However, many people who engage in day trading find it increasingly difficult to stop once they've gotten started, which means they keep trading even when there are no real opportunities available.
Signs of a Day Trading Addiction
There are several ways to tell if you or a loved one may be addicted to day trading. Here are some common signs to look out for:
- Constantly thinking about day trading
- Spending more time on the computer analyzing markets than doing anything else.
- Feeling restless or irritable when not able to trade or watching markets constantly
- Taking increased risk without much strategy
- Neglecting relationships and personal responsibilities in order to focus on stock market activity.
- Making impulsive decisions based on short-term returns instead of longer term considerations.
- Finding it hard to stop or slow down during your trades.
- Making trades even when you don’t need to.
- Trading becomes the only thing that brings pleasure or fulfillment into your life.
Get Help for Gambling Addiction
If you find yourself developing unhealthy habits surrounding day trading or other forms of gambling, it’s best to get help before things get any worse.
Although stock trading isn’t typically recognized as being addictive, it definitely shares many similarities to gambling addiction.
At Algamus Gambling Treatment Services, we have spent the past 30 years treating individuals with all types of gambling addiction - including stock trading. For more information about how we can help, speak to our gambling addiction counselors or leave us a comment below.