{"id":403601,"date":"2021-05-13T12:28:29","date_gmt":"2021-05-13T10:28:29","guid":{"rendered":"https:\/\/ftmo.com\/?p=403601"},"modified":"2021-08-16T11:23:50","modified_gmt":"2021-08-16T09:23:50","slug":"dont-risk-what-you-cant-afford-to-lose","status":"publish","type":"post","link":"https:\/\/ftmo.com\/en\/dont-risk-what-you-cant-afford-to-lose\/","title":{"rendered":"Don\u2019t risk what you can\u2019t afford to lose"},"content":{"rendered":"
In this article, we explain the reasons why trading may become addictive and why traders might fall into situations that could potentially lead to a negative experience about trading. In addition, we focus on cases in which traders, in combination with different aspects of trading, can worsen their financial situation and how to avoid such financial setbacks.\u00a0<\/em><\/p>\n These days, a lot of people\u00a0search for new ways of generating income. Many start to discover and learn about trading.\u00a0While trading might seem to be an easy task at a first glance, however, it is evident that novice traders tend to rely only on the basic formula of buying low, selling high, or vice versa.<\/p>\n Moreover, the urge to make some quick money is often amplified when someone\u2019s financial situation is on the verge of instability.<\/p>\n This often happens when people lose jobs that used to provide stable and secured income for their day-to-day expenses.<\/p>\n Before we jump to many different theories, definitions and findings of this article, let us relax our minds and ask ourselves some critical questions that we can carry along on our trading journey or at least while reading this article.<\/p>\n Ask yourself these questions and answer them in the most honest way possible.<\/p>\n FTMO Traders already know that trading is a very risky business as numerous factors can cause pressure on their psychology, thus affecting their profitability, discipline and decision-making processes.<\/p>\n Those who have difficulties in handling emotions often neglect situations when markets are not in the trader\u2019s favour and they may end up losing more than what they intend to, mainly due to poor preparation, risk management, and psychology.<\/p>\n Additionally, since trading often involves leverage, profits or losses are being magnified, and for that reason trading can be dangerous when you are not fully aware and ready.<\/p>\n <\/p>\n <\/a><\/p>\n <\/p>\n You might have already bumped into one or more risk warning disclaimers, whether it was on brokerage, trading education site, prop firm or elsewhere.<\/p>\n As far as these disclaimers might appear as an annoying formality, one cannot be far from the truth. What do they say? That trading can be risky, your capital is at risk, or that only a handful of traders are profitable and others lose capital and so on.<\/p>\n This is due to the fact that brokers\/proprietary trading firms tend to advise new traders that trading with leverage may cause immense losses, and therefore the individual financial situation should always be put into consideration prior to starting trading.<\/p>\n In certain countries, licenced entities are also required by law to publish the trading success rates of their clients, exposing the reality in the most transparent effort.<\/p>\n The good thing is that brokers\/proprietary trading companies often offer demo accounts or Free Trial accounts in which traders can experience the trading environment, applications, and overall trading conditions risk-free.<\/p>\n A lot of traders tend to overlook this step, however, it is extremely beneficial to get familiar with all trading aspects and conditions to avoid any possible hassle and surprises while trading live.<\/p>\n Further to that, every broker, prop firm or liquidity provider offer different pricing, market hours, and trading conditions. Gaining the experience risk-free is the battle half won.<\/p>\n Firstly, let\u2019s break down what addiction means and how it is acquired. The definition of addiction is basically an urge to a particular activity or a substance that we can hardly control or refrain from.<\/p>\n It is nothing more than a repeated habit that becomes an addiction over time. One can build an addiction to almost anything. It can be sugar, coffee, smoking, alcohol, drugs, etc.<\/p>\n Besides the addictions which are part of substance dependence, being addicted to trading is part of behavioural addiction that involves an inability to stop participating in particular activities.<\/p>\n The same reason why trading can be addictive is identical to why gambling is addictive. As science has already proven, when you win while playing in a casino, the brain releases certain neurochemicals affecting a brain, such as dopamine and serotonin.<\/p>\n These neurochemicals are the main causes for the euphoria, excitement and an indescribably good feeling at that moment. They directly affect the brain by activating its reward system and over time, the brain becomes accustomed to this type of stimulation in order to feel pleasure.<\/p>\n In one of our articles \u2013\u00a0https:\/\/ftmo.com\/en\/forex-gambling<\/a>,\u00a0we discussed why trading resembles gambling so much and how we can actually become consistently profitable. In case you have not read it, go ahead and have a look at the article to have an idea to what extent trading is the same as gambling and why trading is actually more than gambling.<\/p>\n A brain can become addicted to any positive feelings and over a certain period of time, it craves more for the excitement and euphoria from winning trades just like winning in roulette. This can even be elevated by underlying mental health problems, passed genetics from family members, and many other factors such as that trading has become more accessible with the rise of the internet.<\/p>\n What are the symptoms of trading addiction?\u00a0<\/strong><\/p>\n Being obsessed with researching, checking charts, performing technical analysis, reading news to watch the fundamentals do not necessarily indicate addiction to trading.<\/p>\n However, when other important tasks are neglected or you find yourself refraining from activities that used to be pleasurable and in your normal daily routine, you might consider reflecting on whether you are addicted or starting to be addicted to trading.<\/p>\n The sooner you detect this, the better. On another level, when you start to feel anxious, stressed, irritated when you are not trading, or even worse, looking for \u201cout of pocket\u201d money just to place trades, it might be beneficial to start searching for help from a professional.<\/p>\n As we have discussed above, taking loans or using money that is devoted to covering daily necessities is certainly bad money management and financial illiteracy.<\/p>\n While it does not necessarily mean that a trader may not be able to generate money from trading, it certainly indicates that such trader is over-risking which eventually amplifies the emotions both positive and negative.<\/p>\n The consequences of these amplified emotions may either cause bad habits of money management, anxiety or in a worst-case scenario mild symptoms of trading addiction. Some traders are likely to engage in revenge trading and over-risking their trades without a proper analysis of their strategy.<\/p>\n Trading under financial pressure has a direct impact on the biggest enemies of money management \u2013 fear and greed. Since these emotions can be magnified due to financial pressure, they usually take over your decision making which is contradictory to money management and risk management that we stress about at FTMO.<\/p>\nTrading is a risky business<\/h2>\n
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If you start, do it risk-free<\/h2>\n
Trading can be addictive<\/h2>\n
Trading vs Gambling<\/h2>\n
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Trading under a financial pressure<\/h2>\n