When Investing Turns into Gambling: The Psychological Toll of Short-Term Trading

A US study has found that almost two thirds of young men who trade daily describe themselves as failures, a rate nearly identical to that of daily gamblers.  

For investors with growing access to digital trading platforms, the findings raise uncomfortable truths about what short-term trading does to people, and their portfolios. 

Investing vs Trading 

There’s a version of moving capital around that looks nothing like the investing taught by the masters. 

It happens on a phone, between meetings or classes, dozens of times a day.  

It’s fast, adrenaline-fuelled and, for a growing number of young men, a deeply unhappy pathway. 

A study of 2,000 American men published by the Institute for Family Studies found that a quarter of men aged 18 to 29 trade stocks daily.  

You read that right. One in four young American men identifies as a day trader.  

Of that group, 64% said they felt like failures. That figure is almost identical to the 66% of daily gamblers who reported the same feeling. Daily fantasy sports and pornography use tracked similarly. 

The surveyed men who traded less than daily were about half as likely to report feelings of demoralisation.  

So, the pattern is connected with trading compulsion and frequency, rather than investing per se. 

This is a US study, but the behaviour it describes is not confined to Wall Street.  

Retail trading volumes in Australia are following a similar trajectory. 

The Line Between Investing and Gambling has Blurred 

Trading has risen to become a global phenomenon.  

Case in point: retail stock trading volumes have doubled globally over the past 15 years, and day traders have driven options volumes to record levels.

In a similar vein, leveraged ETFs now account for a record 16% of total global ETF daily trading value despite representing only ~US$250 billion, or 1%, of the total ~US$22 trillion global ETF industry.  

Meanwhile, AI-related long-leveraged ETFs now account for a record 58% of total exposure across long-leveraged ETFs, up from 26% in 2022.  

In other words, this market is building upon massive amounts of leverage. 

Many trading platforms have leaned into these shifts by offering more of the leveraged products that are in hot demand, blurring what used to be a distinct line between markets and wagering. 

Australia has watched a version of this play out through contracts for difference and leveraged trading apps, which offer stock-like exposure with the speed and adrenaline of a bet.  

ASIC capped CFD leverage at 30 times from March 2021 after reviews finding that most retail investors using these products lost money. ASIC has since gone further, introducing stricter licensing requirements for financial influencers (also known as ‘finfluencers’) promoting risky CFDs on social media. 

This is a big deal for many younger investors. 

A Northwestern Mutual study found that 80% of Gen Z investors had invested, or considered investing, in stocks, options, crypto or prediction markets because they felt financially behind and saw these tools as a faster way to catch up.  

With home ownership increasingly out of reach for younger Australians and wage growth trailing asset prices for much of the past decade, the temptation to find a way to trade into financial security is an understandable response to this growing challenge. 

Why the Losses Hit Harder Than the Wins Feel Good 

Researchers have hypothesised that daily trading, like daily gambling, may function as both a coping mechanism for stress and loneliness, and a contributor to them.  

This two-way relationship helps explain why the emotional toll shows up so consistently across different high-frequency, high-stimulation activities. 

It’s a troubling picture for day traders.  

Across the mentioned survey’s respondents, 42% agreed with the statement ‘I am inclined to think that I am a failure’, a feeling that was particularly pronounced among men without a degree, and those neither employed nor studying. A quarter said they felt lonely all of the time, and a further 30% said they felt that way some of the time. 

There’s also a striking tension in how these young men see their own prospects. Seven in ten agreed that success is more a function of who you know than of ability or hard work, yet 84% said they still held ambitious plans for their future.  

That combination of cynicism about the system and stubborn optimism about their own pathway may be part of what pulls people toward trading in the first place. If the game feels rigged, a fast, high-variance approach can feel like the only way to beat it. 

What the Evidence Says about Frequent Trading 

There’s clearly a problem at the heart of this trend, but it isn’t related to the craft of investing.  

The issue is in the way many young investors are engaging with markets, through constant monitoring, frequent buying and selling and a search for quick validation. 

It’s working against them both financially and psychologically. 

Frequent trading exposes investors to structural headwinds that have nothing to do with skill. Every trade incurs a cost, whether through brokerage, the bid-ask spread or, in the case of leveraged products, funding charges that accrue the longer a position is held.  

Timing entries and exits consistently well enough to overcome those costs is difficult even for professional fund managers with dedicated research teams. For an individual trading on a phone between other commitments, the odds are much worse. 

Breaking it Down 

If this is touching on challenges in your own investing journey, there’s good news.  

Addressing this challenge is simple, albeit challenging. 

It’s as simple as reducing the frequency and emotional stakes of each investment decision you’re faced with. 

That means setting firm rules before you invest, such as position size limits and predetermined exit points, rather than deciding in the moment.  

It means automating regular contributions into a diversified portfolio so that your investing decision is made once, not daily.  

And it means being honest about whether checking a trading app repeatedly through the day is adding to your returns or simply adding to your stress. 

For investors who want exposure to growth assets without the compulsive checking that’s associated with distress, diversified ETFs and managed funds remain the most evidence-based way to build wealth over time.  

They won’t deliver the adrenaline hit of a winning trade, but they also don’t require you to be right, and fast, every single day. 

It’s a Long Race Rather Than a Sprint 

This is a case for being clear-eyed about the benefits of investing over trading.  

A long-term, diversified strategy built around regularly investing into managed funds or ETFs is built to compound slowly and absorb short-term volatility.  

A pattern of daily, speculative trading is built to generate short-term outcomes, and short-term outcomes in markets are dominated by noise rather than skill. 

If you are experiencing distress related to financial pressure or gambling-like behaviour, Lifeline (13 11 14) and the National Debt Helpline (1800 007 007) offer free, confidential support. 

Disclaimer: This article is prepared by Simon Turner. It is for educational purposes only. While all reasonable care has been taken by the author in the preparation of this information, the author and InvestmentMarkets (Aust) Pty. Ltd. as publisher take no responsibility for any actions taken based on information contained herein or for any errors or omissions within it. Interested parties should seek independent professional advice prior to acting on any information presented. Please note past performance is not a reliable indicator of future performance.