Trading Without Limits: How Stock Market Addiction Affects Mental Health
"The highest form of wisdom is to know when to play and when to stay away." — Mike McDermott
The Story of a Young Trader
In June 2024, an Indian Chartered Accountant (CA), Roshan Agarwal, shared a concerning incident on his X handle. One of his clients, a third-year engineering student, had lost around 40 Lakhs in trading. Despite being unemployed, he borrowed money from various sources, including personal loans, his family’s bank accounts, and friends, to fuel his trading addiction. In 2023, he lost 24 Lakhs, but he didn’t stop there—he continued to trade, accumulating a further 20 Lakhs in losses in 2024.
When asked why he continued, the student admitted he was addicted to trading and unable to quit. Initially, he had won small amounts, which fueled his hope for easy gains. But as losses mounted, he found himself in a financial and emotional crisis, telling Agarwal, “I thought I’d win the money back, but now I’m getting suicidal thoughts.”
This story highlights the growing trend of stock market and trading addiction, particularly among young people attracted to the lure of quick profits.
The Thin Line Between Investment and Gambling
Investing in stocks is often seen as a pillar of economic growth, promoted and protected by governments worldwide. However, when unregulated and driven by impulsive decisions, trading can mirror gambling addiction.
Defining Gambling and Trading Addiction
Gambling involves placing a bet where the outcome is unpredictable, resulting in either a win or a loss. Trading, especially in high-risk areas like options and futures, can share these characteristics. Here, transactions carry fees, and markets fluctuate unpredictably, making it difficult for investors to control outcomes. Neuroimaging studies reveal that similar brain networks are activated in gambling and trading addicts, reinforcing that certain types of trading can become an addictive behavior.
Why Stock Market Addiction is a Problem
While taking calculated risks in financial investments can yield returns, the drive for "quick money" is often problematic. The addictive nature of this desire for instant returns is evident in the following factors:
High Correlation with Mental Health Disorders
According to Statista, gambling disorder affects up to 1.6% of adults worldwide and is often linked with other mental health issues like anxiety and depression. For example, neuroimaging studies show that addicts exhibit abnormalities in brain areas related to reward processing, making it harder for them to stop.Short vs. Long-Term Investments
Investing with a long-term perspective generally involves more stability:Simplicity and Reduced Risk: Long-term assets like property or shares appreciate over time, benefiting from compound growth and reducing risk.
Liquidity and Flexibility: In contrast, short-term investments provide quick access to funds and potential rapid returns, but require constant monitoring and active management. The impulsive, high-stakes nature of short-term trading often leads to addiction due to the need for immediate gratification.
Why Do People Get Addicted? The Hooked Model Explained
Addiction often stems from the desire to seek rewards or relieve stress. Nir Eyal’s Hooked Model describes this process in four stages:
Trigger: The allure of making quick money serves as the initial draw.
Action: The individual begins trading, often experiencing small wins that reinforce the behavior.
Variable Reward: The unpredictable nature of wins and losses keeps them engaged, hoping to win back losses.
Increased Investment: Over time, users may double down to regain losses, escalating the addiction.
This pattern creates a cycle that’s difficult to escape, pushing individuals deeper into the addiction.
Other Contributing Factors to Trading Addiction
1. Easy Accessibility and Fin-fluencers
The rise of apps and social media financial influencers, or “fin-fluencers,” has fueled the gambling culture. Many first-time investors, especially from rural and semi-urban areas, turn to these figures for advice, often risking money without understanding the implications.
2. Herd Behavior
Many young investors rely on popular trends rather than researching. Herd behavior, or following what others are doing, can drive individuals into financial pitfalls without fully understanding the risks.
3. Cognitive Impulsivity
Research shows that addicts often make impulsive choices, favoring immediate rewards over long-term gains. This can lead to riskier decisions and ignore consequences, contributing to financial loss.
4. Impact of Media and Celebrity Endorsements
Many high-profile celebrities endorse gambling and trading platforms, failing to highlight potential risks. For example, a young cricket fan, Prateek Kumar, became addicted to fantasy gaming apps promoted during cricket matches. His father, a small farmer, struggled to curb Prateek’s betting habits, exemplifying the negative influence of such endorsements.
Psychological and Social Dimensions of Trading Addiction
Addiction often intersects with mental health disorders. Studies reveal that gambling addicts are more likely to experience:
Anxiety and Depression: The uncertainty of trading can lead to heightened stress and anxiety.
Cognitive Deficits: Addicted individuals often struggle with decision-making, planning, and impulse control.
Trauma and Early Negative Experiences: People with histories of trauma or loneliness are at higher risk of developing gambling and trading addictions, as these behaviors often provide temporary relief from underlying issues.
The Need for Regulatory Oversight
Countries like the United States have generated billions in tax revenue through regulated gambling. In India, however, gambling laws vary by state, which limits the country’s ability to harness economic benefits. Clear regulations could prevent young people from becoming addicted, protect their financial security, and provide resources for those affected by addiction.
A Call for Education and Responsibility
While stock market trading and investments can be valuable tools for personal finance and economic growth, responsible practices and regulations are crucial. Educating the younger generation about safe, long-term investments can reduce the appeal of high-risk trading and foster healthier financial behaviors.
-Chandrani and Rijul
