By Ari Kiev
John Wiley & Sons Inc.
204 pages, $49.95
The author presents readers with real-life interviews, personality profiles and case studies that illustrate the types of stress that high-powered traders experience throughout the trading day, whether the volatility is flat or all over the map. Even novice traders will understand and see themselves in some of the illustrative examples. Imagine the trading volatility and stress during the day when the Bear Stearns news come out in March 2008 and the markets were tanking. Traders must learn know how to handle their stress to make wise trading decisions on volatile days like this, or they should stay on the sidelines and not get whipsawed and depressed.
Kiev starts out on his journey by providing readers with basic information on the nature of stress, the emotions of stress and the dangers of trading under stress. He describes the four stages of stress and the specific problems that may occur in each phase. Then he reviews fear and greed, guilt, worry, anger and euphoria.
Traders exhibit characteristics that work against them including overconfidence, fear, recklessness and irrationality. Traders need to distinguish between good and bad stress and make sure they learn the techniques for dealing with the latter and maintaining their focus under all market conditions.
The most compelling segments of the book are the actual stories and interviews with traders, most of whom have worked for hedge funds and handle millions of dollars a day. Clearly, these individuals need to successful manage stress or their careers will be short lived.
Three chapters offer particularly keen insights include those on failing to manage risk, ego and obstinacy and failures with shorting stocks. Shorting stocks takes a great deal of conviction and is difficult for many traders to master, and finding shorts takes time and induces stress. Too many traders panic after shorting stocks. They don’t stick with their position fearing a price surge. This stress needs to be offset or the results will not be good.
At the end of the book, Kiev provides a list of three common stress busters, as well as a breathing exercise, an image awareness exercise, a writing experience and a way to conduct a self-evaluation. Learning to live with stress is critical and the author provides insights on ways to accomplish that. This book certainly is one that experienced and novice traders will greatly benefit from. Overall, Kiev offers traders a look into their psyche and ways to handle and minimize stress. Taken to heart, traders can hopefully improve their trading results, and live less stressful lives in their work, family and other endeavors.
Leslie N. Masonson is president of Cash Management Resources, a financial consulting firm, and author of All About Market Timing and Day trading on the Edge. Reach him at lesmasonson@yahoo.com.