All publications of Supriyo Maity . कोलकाता , भारत
Is Trading a Passion or an Addiction?
Long story short: know yourself and don’t blame others. Stay in control and do your homework
At a time when the world is battling COVID-19 crisis in every possible manner stock market has come to the forefront not only to simplify financial lives also enable them to carry on with their routine tasks as usual.
On Friday, I had a test of passion versus addiction. I was little slow on the grind that day. I was still able to get up close to my normal time, read through news highlights on the market and individual securities and check in some quality traders that I trust. Just right after my breakfast, my first inkling was to plop down in front of my monitors not on the couch. I managed to avoid the temptation until 1 pm, when I did a quick check-in to make certain trade but nothing was blowing up, and then stepped away for my remaining college lectures. I felt good about it, and honestly, if you can’t step away when you need to, then it is time to weigh passion versus addiction.
Most young traders have a passion for stocks and trading, but it isn’t far away from gambling. Some would argue it is gambling, with how I see some non-professional traders approach the game, I would agree. Days when you have to be away are good days to discover whether you have a passion or an addiction. Are you trying to sneak away to make trade for profit, checking Twitter about your stocks, or texting your friends about the market?
It’s okay to be passionate, but when as a non-professional it becomes an addiction, you could quickly find yourself over trading or ditching risk management and important objectives to partake in the action.
The same thing can be seen in what stocks you are trading. I have noticed more and more new generation traders getting into thin floats or in penny stocks, seeking that 50% or multi hundred percent gain in one day or two. And they are annoyed if they don’t get it. The growing problem I see there is a need for greed. All huge gains and nothing less. And the need for a new trade as soon as the old one is closed, when they don’t go your way, then there is an immediate blame on somewhere or upon someone else.
What I am seeing in this market is we are breaking small stocks and breaking traders. The really good traders are finding story stocks that go with the analysis and theme. But as I mentioned with the story stocks, many are just a business plan not really a company. The measures will buy into the hope, hype and idea that something maybe there. In some cases the risk is worth near the beginning, but then the stocks double. The risk is now outweighs the reward. Smart traders exit and late traders become bag holders still clinging to a dream.
From there, the stock fades to the level where it started, it is now broken. A huge spike with hype and lots of trapped traders. Even good news will likely to be met with selling on loop as trapped traders look to get out flat, relieved to escape. If nothing happens, those trapped traders will eventually give up and send the stock even lower.
Is this really any different then bringing a company public or what we see larger stock split? Not really, it’s just bigger on a percentage scale.
The truth is new generation traders need to learn to be responsible for their own action. If you see someone in your view as a successful trader putting out a buy on a stock you have never heard about before and you slam the buy order button, you made your choice and deserve the outcome. If the stock is a bulletin board stock or trading under 50 cents, you doubly deserve it. If you have to buy 50,000 shares just to have a $100 position, then you are gambling probably have a “hope” as your core strategy.
Long story short: know yourself and don’t blame others. Stay in control and do your homework. In the end you can eliminate hope and blame from your daily routine and your P&L statement.