Beware the 'Stock Market Trading Jones'
NEW YORK (Real Money) -- Today, I see many traders and investors afflicted with what I call the stock market trading jones. Market participants feel compelled to overtrade. It comes in the form of a near-obsession in overtrading both on news-based dislocations (to the upside and downside) and on non-dislocations in the normal course of business, typically through chart gazing. The need to play too many earnings reports and the desire to trade macroeconomic events reside among numerous other catalysts.
There are several obvious influences that contribute to the addiction of too-frequent trading:
- Brokers. Brokerage companies have made trading at home easy and inexpensive. Sophisticated Internet-based trading platforms allow individual investors to trade actively at markedly reduced commission rates relative to any other time in history.