The rise of trading apps is leading to a surge in retail traders. There was once estimated to be only 14 million active traders on the market, and now Robinhood Markets (NASDAQ:HOOD) alone has 22.5 million funded accounts worth over $102 billion.
Millennials and Generation Z are increasingly using apps like Robinhood, Public, and Webull to make trades, and they’re getting increasingly sophisticated.
But sometimes they can be flat-out aggressive, as drunk trading becomes more of a trend. Legislators are concerned that the crypto boom and mobile trading has enabled a culture of gamified trading. These two trends are reportedly leading to a third of people trading while under the influence of alcohol.
That’s the message from a recent survey, and that means it’s time to walk the line and examine how drunk trading can land your portfolio behind red bars of losses.
How Many People Trade Drunk?
According to the survey of 1,116 U.S. consumers taken June 2021, 32 percent of people admitted to trading while drunk, which jumps to 59 percent of Gen Z investors.
It’s a more recent trend because of how much easier and cheaper it is to trade today than it was 20 years ago. If you wanted to buy a stock at the start of the millennium, you had to use a clunky website that was hard to navigate and only available via desktop.
Today’s trading apps look like video games; they’re sleek, simple, and intuitive. And they not only let you invest for your retirement, but they also enable gamification of the market. Investing – like gambling, drinking, and anything else – can become addictive if not properly monitored.
Managing your portfolio while drunk is obviously dangerous for a variety of reasons. Alcohol impacts the brain’s function and leads to more risky decision-making and mistakes. In fact, there’s a notorious incident in which a man was banned from the market for a drunk-trading incident.
The Oil Futures Drunk-Trading Incident
In the early hours of June 30, 2009, Londoner Steven Perkins was on a days-long drinking binge when he bought over seven million barrels of crude oil futures.
He was on a company-sponsored golf trip and had an alcohol-induced blackout. The trade cost his firm PVM Oil Futures $520 million in a two-hour period, driving the price of Brent Crude oil up over $1.50 a barrel (inflation-adjusted to $1.81 in today’s prices).
This left his company holding a substantial volume of futures which cost it nearly $10 million to honor. Because the company was only earning around $12 million a year, it ended that year with a $7.6 million loss.
Because of his actions, Britain’s Financial Services Authority (FSA) fined Perkins 150,000 pounds. Perkins was financially unable to pay such a fine, so it was reduced to 72,000 pounds ($108,000). The FSA also suspended him from trading, as he posed a significant threat to the market.
He also was enrolled in an alcoholics’ rehabilitation program to help cure his addictions. And Perkins’s life trajectory is just the start of the risks.
Risks of Trading While Drunk
Perkins was a professionally licensed trader working at a brokerage firm, and that means he should have known better than to do what he did. The average retail trader may have access to the same sophisticated tools, but they are more likely to make mistakes than a corporate firm while trading sober.
Rookie traders often lose $100,000 or more while attempting to day trade futures. One user even killed himself after being hit, erroneously, with a bill for over $700,000. There was no indication either of these people was inebriated, and they’re far from the only such cases. The point is even when sober it’s difficult to navigate the markets.
Alcohol degrades your thinking, coordination, mood, and behavior. It’s not uncommon for people to make emotionally charged decisions while drinking, and it’s never a good idea to make emotional market moves.
Now the rise in cannabis stocks has some investors looking to trade on drugs instead of alcohol.
Is Trading on Drugs Any Better?
Cocaine and Wall Street are often intertwined in pop culture, and that’s for several reasons. Working for a big bank is demanding, and the drug is known for providing a burst of energy. But because it’s illegal, whenever a wealthy Wall Street executive is caught with it, headlines are made.
In 2007, retired Lloyds of London banker Trevor Collenette was caught with over 450 pounds of cocaine aboard a yacht. The infamous Wolf of Wall Street Jordan Belfort often discusses his consumption of coke, which was featured in the movies The Boiler Room and The Wolf of Wall Street.
The fly in the ointment? All of these people were committing criminal acts. Many people stay successful while keeping their noses clean.
While marijuana is largely legalized like alcohol, it can also affect your decision-making skills. You should avoid making impulsive decisions with your investments at all, and doing so on any drugs or alcohol can be a dangerous mix that could lead you to lose everything.
Resources to Help with Addiction
The U.S. Department of Health and Human Services has a national helpline setup to help with addiction. It’s done through the agency’s Substance Abuse and Mental Health Services Administration (SAMHSA), which is a confidential and 24-hour helpline.
Whether it’s substance abuse, day-trading addiction, or simply depression, don’t be afraid to reach out to someone for help.
There’s no shame in seeking addiction recovery services, but there’s a lot of shame to be had when you drive your company into the red. Investing in the stock market can provide a lot of great benefits, but not everybody wins.
Getting drunk or high to play a game on the stock market can be temporarily fun, but be careful. The market can take everything as fast as it gives.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.