How do you know if you have a problem with trading especially those that have massive losses? (For learning and sharing purpose)

This topic is interesting due to recent volatility in the stock market, resulting in massive losses for some in trading. Is good to learn, discuss and share experiences.

Most people can trade responsibly, but for some individuals, what may begin as just regular investment/trading may sometimes cross over the line into problematic investment/trading. Let us look at some signs of making oneself in deeper mess and sharing of some case studies. Some did not want to chalk up those huge losses as they did not expect the unexpected to happen such as suspension or news that turn against them due to inexperience in the world of investment.

The problem starts when one has massive losses and wake up every day wishing to recover. Such fixation thoughts on finding ways and means to trade and win become increasingly problematic, to the point where the person no longer is taking care of his/her day-to-day responsibilities, affecting his/her daily routine and health.

I have seen cases where those vast losses led to the person call in sick or take a day off from work because of his/her trading activities and losses. They just do not have the mood to work. No one like to lose money especially hard earned savings. The worst situation to be in is to keep thinking how to make back your losses. I am very against it. In 9 out of 10 cases, the person who tries very hard to recover those losses just made a bigger mess for themselves as they trade under pressure or take a big position that they could not handle. The reality that happens more often than not is when one trades under pressure and make a significant trading position; one tends to make a profit immediately when they see gains BUT while in the wrong position they tend to let losses run as most could not bear to cut. It is a disaster for most as they tend to win little and lose a lot, resulting in a worst mess than before. I have seen life, job an family ruin, and this not only affects himself but also his/her broker. Is a reality that when one is pushed to a corner, he/she would rather gamble or take a huge risk with what is left then to pay back previous losses or loans as sometimes the money left is not enough to pay back to all creditors, so they just “hiong”. The result is the remisier have to bear the debt with the client, while the client’s family and loved one are also affected. It may take many years for one to recover from such mess so I would advise those in this position to stop before your mess spiral to bankruptcy and not let your loved ones worry about you.

For those still in a position where they can still come back, I am recommending that it is better for one to write off those losses and start afresh, then to try to recover back. I would hope they psycho themselves that they just donated the money for a good cause and learned from their misadventure and slowly recover back through business, work or long-term investing. Some people do recover back but the statistics in my memory is less than 1 in 10 recover their losses, and they need to “hiong”. Even for those who did recover, there is a high chance they will still try again next time and second time round may not be so lucky second. No doubt I have seen people make many times buying risky counters or gamble at the casino to recoup all their losses when down but most f the time is hard to fight back when down to much. My advice to those who “hiong” or take a huge risk to recover when down to clearly evaluate the consequences should they dig a deeper hole. Sometimes this newer hole that one digs himself in may never see the light again and lose everything. Eventually making those love ones around you sad and worried.

Warning signs
1) Keep dwelling too much on those losses and affect work
2) Hiding losses from love ones and becoming more secretive. (Lies build upon lies until that you don’t even know yourself when you’re telling some shaded version of the truth or an outright falsehood.
3) Feelings of guilt or tension fade away once you’re on your way to what matters to you: trading to recover losses. But remorse once trading is over.
4) Keep borrowing money to meet your trading losses and getting funds everywhere to plug your holes until reputation tarnished. No one likes to have their image tarnished, and reputation is something that, once damaged, is hard to restore
5) Sleeping difficulties because of problematic trading and losses. The thought at night could be how to pay your losses and keep dreaming that all one need is one big win is all for one to recover and keep thinking what counters to punt tomorrow.

When you face the situation, highly likely the more you trade, the more one will lose. And the more desperate you become to recoup those losses. The last thing is to take up loan or to trade on high leverage to recover. Is a bottomless pit. For those who still have the collateral and credit rating to be able to obtain a loan, taking one out for the real purpose of financing trading activities is a bad sign – and it’s getting worse. Incurring debt to chase after games of chance including trading is a losing proposition. It’s an indicator the individual is quickly losing his or her grip on reality. But, then again, problematic traders always think that the big win is just around the corner. And dig a bigger hole. Making their loved one worry. Is never too late to stop especially those not in debt. Just let go of the past mistakes which is easy for me to say but in reality even for myself I think is hard. Just have to put in effort to move on and make back from things you are good at. Always remember your loved ones are always behind you.

For further discussion and debate. This thread is not to induce buying and selling. I am just worried reading and knowing that got some IN users just keep “hionging” to recoup losses while leading to a bigger debt. Need not only skill but lots of luck to recover. This thread Is just for education purpose only. Please do your due diligence when buying and selling of shares and seek your financial advisors for clarification. All the best.

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72 likes 103 comments
jameslimlim

Yes. you are right.
many lesson to learn... and yet many lesson to forget.

Newbiewinvest

Reply to @jameslimlim : Yet many lessons are forgotten....

Pheng

Mr Li, you are the good person i am mentioning. You are really caring and you feel for those who are in this unfortunate state. God bless you!

Li_Guang_Sheng

Reply to @Pheng : Ya. Not easy. Lucky got a caring and supportive wife. They become closer after his ordeal.

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Newbiewinvest

Heartfelt thanks for the write up. Indeed a kind sincere soul you r, bro LGS! God bless u and all your loved ones richly.

smurfy

how... I tink I keep avg down on singtel.....

luxcan

Reply to @smurfy : so far m1 is the one not losing mobile subscribers. anyway if singtel falls to $2.8, I will go in as well.

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doreengoh

Mr Li you speak like a psychologist or a counsellor.Excellent.

Zzz444

Don’t trade with money u can’t afford to lose. If u put 1 mio into markets make sure u can continue to live normally even if u lose everything.

And of course u diversify so u won’t end up losing everything !

Pheng

You are a good person. You sincerely cares for others!

DreamBig

i think certain ground rules are important..

Reasons for exit - know at which point to run
Stop loss hit? break support trendline etc?

Position sizing - enter a pilot portion to test out, only avg up

Keep a record for all new entries, exits, reasons etc

Psychological management - always know how you should be feeling, remember the feelings u have when holding on to winners, and feelings when holding on to losers. Identify current state, and take action on portfolio constituents.

cut loss, cut loss, cut loss - my biggest worries (and biggest losses) was when i held on to losers.. after awhile my excel file shows my negative trends - erase them!

diyquant

Psychology is a very important aspect of trading/investing. One must always be in a clear state of mind before you execute a trading decision. Even small emotional setbacks can have detrimental impact on your trading decisions that can set your returns to the negative territory. Eg MRT breakdown, got scolded by boss, loss soccer bet, missed $Creative(C76.SI) bull charge etc. Like the recent market rout, many are panicking and social medias were (still are) filled aura of negative energy. If one is not strong enough, it is easy to get sucked into it and start to throw away all your strategies and join in the panic (or turn from short term trader to long term investor in hope for the stock to rise again. Market always go up eventually ya)

sysy

thanks for sharing :)
this is really a good guide especially for newbie like me ...

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