Hi, I am new here and not sure if I’m in the right forum but I’m hoping someone can offer some advice. I’m concerned my 24 year old son is addicted to trading on stocks and shares. He is currently living with his Dad and is working part time and spends the rest of his time trading or on computer games in his bedroom. He became interested in trading a few years ago and until this year has been practicing and learning how to trade.
He went live early this year and has lost money, I’m not sure how much, but now breaks even. He sees it as a business and says he can’t see himself doing a 9-5 job. My concerns are that he has mood swings based on how trading is going. I have recently spoken to his girlfriend who says he is often up until midnight trading and is also looking at different options for investment. He has had periods of depression and suffers from low self confidence and I’m concerned that his trading is making this worse. I would be grateful for any advice.
Trading stocks, shares or foreign currency (known as “forex”) can be done basically 2 ways in the U.K. spread betting and CFDs (“contract for difference”)
Spread betting is classed as gambling, and winnings (or profit) not subject to tax etc exactly as winnings from any form of gambling. The companies that offer it must be registered with the gambling commission.
CFDs are slightly different, in that they are legally not classed as gambling and any profit earned trading using CFDs is subject to capital gains tax.
However... for most practical purposes these are identical, and differ in name only. Both allow a trader/punter to speculate on price movements of various commodities such as stocks, foreign currency, company shares, indices (such as the FTSE-100).
The vast majority of retail traders (ie those trading at home with their own money, rather than working for an investment bank) lose money on these speculations. It takes literally years to develop the skills and analysis to make consistent profit. Most people who trade don’t ever do that, they simply guess what the price is going to do. In other words, it’s a gamble, plain and simple.
Successful traders are notoriously calm and rational, not given to mood swings or depression at losses or euphoria at profits. Someone exhibiting those emotions is not trading, they are gambling. Also, successful trading takes concentration and careful planning, if he’s up past midnight rather than sticking to a trading schedule then that is another bad sign.
My advice would be to try to find out how much the losses are actually mounting up to, because it’s very easy to lose £thousands in a very short time by gambling/trading. And, just like gambling, losing traders tend to chase their losses in a panicky way, risking (and ultimately losing) ever bigger amounts. If he says he’s breaking even I would take that with a very large pinch of salt.
Its not uncommon for people new to trading to take out large loans (~£10k) and use this to fund their trading when they don’t really have a clue what they’re doing or how to make consistent profit. They fool themselves into thinking they’re ‘investing’. It’s nearly always just a complicated way to gamble.
I would trust your gut if you think there’s something amiss. The signs are not good.
Sorry, just to add a suggestion: you could start by asking a simple question:
”Have you borrowed any money to trade with?”
His answer will tell you a lot. If he jumps on the defensive, gives a vague non-answer or evades the question, then you can be pretty sure that debt is funding his trading. That is a big problem.
Some excellent replies and I think you should step in Mrs T and ask him how he really is and see how he reacts.
Trading is a form of gambling with futures and its no soft option. Its sold as something that anybody can learn and make money at.
The truth is far from that and you have to look at the motives of the firms saying its easy to trade.
Obviously its a highly competitive dog eat dog market with some big boys in there like the banks and investment houses...Nobody is selling the golden formula but some are (cynically in my view) selling the basic operating mechanism which they make fees and commission from
Money is at risk, you have to know exactly what you are doing to make a steady profit which takes years to learn. Its not a case of buying some safe shares...it takes knowledge and the risk of gambling.
Depression is not a good sign and only you know how its affecting family life. He may open up to you or he may not but you should mention that you are worried and care about him.
He needs to be ready to seek help if its a problem. He may not be willing to mention the true losses and I dont know his financial situation
Best wishes from everyone on the forum
I can answer perfectly. I am 26 years old. I have lost 30k in the stock market trading. Trading is an absolute scam; you are competing against hedge funds backed by hundreds of millions of pounds which can swing the market in their favour so what chance have you got? Also it is a statistic that 90% of traders lose money. Don’t be fooled by YouTube ads etc. I don’t want your son to end up like me; trading is outlet for negative emotions and very easy to get addicted to. I know how terrible it is for me and how I will lose my money but it is unbelievably addicting and I traded even today
I can only speak from experience and I would say, yes, it is very much gambling as there is a risk associated. The big difference is that you don’t lose lots of money in one go as markets generally don’t fluctuate wildly meaning investments often go up and down over longer periods of time. But again in my experience it has the same effects on your emotions as say sports betting. I’ve stated elsewhere as git into share trading, not in a big way, a few years ago. I actually did ok but ultimately had to cash them to pay for other gambling losses.
Jay is right though, it’s the big boys who influence and shape markets and that’s why they are successful. Like sports betting, smaller players can succeed but you need to know what you are doing.
I have dealt with a horse racing trader who makes not secret of the fa t he earns money basically from mug punters, compulsive gamblers who will bet on anything meaning people like him, who he classes as the 1% make money. Effectively an independent bookmaker.
Sorry, the above was a bit of a rumble but hope it makes some sense.
Hi Ms T
Just wanted to add that with forex, CFDs, Options etc. the liability can be huge - often 10x the value of the cash laid down initially for the position. Some markets can be very volatile if there's not much liquidity so it's very dangerous territory in my opinion.
This could well be the next big issue for young adults - the gamification of trading apps that make it accessible and almost desensitized the money aspect.
Really if you start to trade you should accept and be comfortable with the potential for a total loss of capital - which few are.